Steel City Capital on Anterix (ATEX): “There’s Room for Shares to Double/Triple From Current Level”

Steel City Capital LP, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A net return of 7.6% was delivered by the fund for the Q1 of 2021, above the S&P 500 and MSCI All World Index that delivered a 5.8% and 4.8% returns respectively, but below its Russell 2000 benchmark, that had a 12.9% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Steel City Capital, in their Q1 2021 investor letter, mentioned Anterix Inc. (NASDAQ: ATEX), and shared their insights on the company. Anterix Inc. is a New Jersey-based wireless communications applications provider that currently has an $832.1 million market capitalization. Since the beginning of the year, ATEX delivered a 25.85% return, while its 12-month gains are down by -8.12%. As of April 30, 2021, the stock closed at $47.32 per share.

Here is what Steel City Capital has to say about Anterix Inc. in their Q1 2021 investor letter:

“On 2/16, Anterix (ATEX) announced it had entered into an agreement with San Diego Gas & Electric (SDG&E), a subsidiary of Sempra Energy, for the sale of 900 MHz broadband licenses in its service territory. The agreement will support SDG&E’s deployment of a private LTE network across San Diego, Imperial, and portions of Orange counties, where the utility covers 3.6 million people. Total payment for the broadband license will be $50 million, comprising an initial payment of $20 million in February 2021, with the remaining $30 million to be paid through 2023 as broadband spectrum is delivered to SDG&E. The announcement is very positive for ATEX for several reasons:

  • The $50 million payment equates to ~$2.30/MHz Pop, which is a near 40% premium to the $1.68/MHz Pop (weighted average by population) paid for 600 MHz spectrum in the same counties. Recall that the nationwide clearing price in the 600 MHz auction was $0.93/MHz Pop and that ATEX’s current share price implies a spectrum valuation of ~$0.40/MHz Pop.
  • The deal illustrates that CBRS is viewed by utilities as a complimentary, not a competitive, solution to 900 MHz spectrum. SDG&E recently paid $21 million for CBRS spectrum licenses covering its service territory. The announcement of SDG&E’s intent to purchase 900 MHz spectrum as well should put to rest concerns from investors about an “either/or” decision from utilities.
  • SDG&E was not a utility that had previously tested the spectrum utilizing an experimental license. Its decision to move forward without having tested the spectrum in advance of its purchase should enable investors to take an expanded view of the potential sales funnel.

One week prior to the contract announcement, management had indicated that it was possible for the company to sign up to two contracts before the end of its fiscal year on March 31. When the SDG&E contract was announced, management then noted the SDG&E contract was likely the last for the recently closed fiscal year. The implication is that one contract “slipped,” and I believe there is a high probability of a third contract announcement in the first half of the current fiscal year which will be a catalyst to push the shares higher. I suspect there’s a full court press to have an announcement coincide with the company’s planned analyst day (likely this summer), at which point management will be better positioned to discuss a framework for shareholder capital returns given ATEX’s budding cash position in excess of what will be required for retuning. In the meantime, the stock remains incomprehensibly cheap and none of the prior justifications (lack of FCC approval, absence of utility contracts) hold water. There is still room for shares to double or triple from their current level.”

Our calculations show that Anterix Inc. (NASDAQ: ATEX) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Anterix Inc. was in 15 hedge fund portfolios, compared to 17 funds in the third quarter. ATEX delivered a 30.43% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.