Unidata
Unidata is an Italian telecommunications company whose main service is providing broadband connectivity to residents, businesses, and the public sector. It’s important to understand that, compared to other major European countries, Italy is lagging in the deployment of high-speed broadband connectivity. Unidata has been one of the first movers in this area, building a proprietary infrastructure of more than 7,200 kilometers of fiber optic, providing access to half a million clients.
In addition to providing connectivity, Unidata competes in fast-growing sectors like Cloud and IoT. The company benefits from recurring revenue and strong margins across all its segments. With over 60% of shares held by an aligned management team, they are capitalizing on emerging opportunities with an aggressive capital allocation strategy, including Joint Ventures and an acquisition that has doubled Unidata’s top line.
In the last four years, their revenues have quadrupled, and they are expected to reach €114 million this year (compared to €23 million in 2020 – we reference 2020 instead of 2019 as this sector was not impacted by Covid). However, despite this significant growth, the stock has been underperforming for the past two years—something we attribute in part to its lack of liquidity, despite 10:1 stock split this year—and it is currently trading at just 5x EV/EBITDA, with a market cap of €110 million and net debt of €53 million.
Today, we will analyze their current situation, focusing on the progress of the three Joint Ventures they are undertaking (Unitirreno, Unifiber, Unicenter), which are a key pillar in their growth (timelines, required CapEx, and expected returns), as well as the rest of their segments. We have conducted a detailed valuation (downloadable spreadsheet) and will share our thoughts on it and our positioning.
Support Material
Unidata’s Segments & Joint Ventures
Before starting, we believe it might be helpful to provide a detailed explanation of Unidata’s different segments to facilitate understanding of the current situation.
Unidata has two main lines of business: Services and Infrastructure. Contrary to what one might initially think, the Services segment is the one with more stable revenues, as it includes the fees Unidata charges to retail and business customers who use its services. On the other hand, the Infrastructure segment primarily encompasses the development of infrastructure. Currently, 70% of Unidata’s revenues come from Services, and the company expects this to increase to 90% by 2026.
Additionally, they are pursuing a very aggressive expansion strategy, with three Joint Ventures involving top-tier counterparties to build a Tier IV data center in Rome, 900 km of submarine cable in the Tyrrhenian Sea, and to bring high-quality networks to the so-called grey areas in the Latium region, providing connectivity to 190,000 homes and 8,000 business units.
Note: An important metric for measuring Unidata’s progress is the amount of fiber optic infrastructure they own and the number of households they provide access to. This is because they commercialize part of it themselves, while they lease the rest under 15-year agreements (Wholesale IFRS) to other companies, who then provide customer access and pay a fee for it.
Joint Ventures
Unitirreno: This JV has been signed this year and is expected to be operational in 2025. Unidata has partnered with Azimut for the construction of 890 km of submarine optical fibre in the Tyrrhenian Sea to support continuously increasing national and international bandwidth requirements, in this case to Sardegna and Palermo.
Undiata will be the operator and the responsible of developing the commercial offering. 33% of the JV is owned by Unidata who will make an investment between €12 and €18 million from a total of €80 million. Unidata has the option to be the major owner once the construction phase is completed.