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Chapter 1: What is the main topic discussed in this episode?
Everything you're about to hear is for education and entertainment purposes only. Whilst we are licensed, we're not aware of your personal financial circumstances. Any advice is general advice. Equitymates operates under Australian financial services license 540697.
The space economy is already worth $630 billion and many investors don't even know it. Today, we're going to figure out how we can get exposure. Welcome to Equity Mates, a show where we explore what's possible in the world of investing. If you've just joined us for the first time, a huge welcome to our community. My name is Bryce, and as always, I'm joined by my equity buddy, Ren.
How are you going?
I'm very good, Bryce. Very excited for this episode. We're talking about one of the biggest themes in investing at the moment, I think that's fair to say. Absolutely. Space.
Chapter 2: What is the current state of the space economy?
Space is never-ending. Space has done well over the years. And I think what we've learned with thematic investments is some themes are more enduring than others. I remember early days of our investing careers, we got very excited about the medical marijuana. theme. Legalization was sweeping America. That's right. I would say that theme has been less enduring.
But I think as we've done the research on this space theme, it's obviously headlined by SpaceX and the upcoming IPO and the excitement around that. But what becomes really clear is that space isn't a future looking theme. It's a theme that is
all around us, affecting our day-to-day lives, affecting how everyone consuming this content receive this content, and the projections about where it will go as it kind of shifts from the domain of governments to more and more private industries growing in space. It's pretty exciting.
It is. It's pretty cool. It is. Okay, so before we get into it, this episode is brought to you by BetaShares in celebration of the launch of their new ETF, Rocket.
Chapter 3: How are falling launch costs impacting the space industry?
The BetaShares Space Industry ETF is an ASX first, offering exposure to a portfolio of 30 global companies driving the rapidly evolving space economy.
The fund is also designed to enable fast entry of major IPOs into the index shortly after listing, such as that anticipated for SpaceX.
Learn more at betashares.com.au slash learn slash space ETF, or click the link in our show notes and make sure you read the PDS and TMD and consider if the fund is right for you. Betashares Capital Limited is the issuer, RCKT is the ASX ticker, and EquityMates is an independent operating entity within the Betashares group.
All righty. Well, joining us in the studio today to talk through the opportunity that is space is investment strategist at BetaShares, Hugh Lamb. Hugh, welcome. Thanks for having me. So we're going to look at, as we said, how the industry is mapped today and how we can get exposure and the opportunities.
But as we start with all of our experts on the show, can you share the story of your first investment?
Yeah, absolutely. Look, I'm still relatively young, I'd say, if you can tell by my baby face. But my first investment was back in 2018 to 2019. It was A2 Milk. So at the time, I was in my university days and I was doing a double degree in economics and finance. Everyone was talking about stocks and whatnot, and I thought I had to dip my toes in.
At the time, the Chinese economy was really revving up. They were growing quite fast. The consumer was really driving the local economy. Part of that was infant milk formula, which is what A2 Milk provides. The share price, I think, really had a strong run throughout my uni days, effectively, so 2016 to 2019. And I thought, oh, it's a pretty good business.
So Jane, I think she was a CEO at the time, and she was doing some incredible things in the business. So, you know, fast forward, the stock went really, really well. And then as we know what happened in COVID, we effectively shut down and the export of infant milk formula to China effectively stopped. And so the tank just absolutely crashed.
I think I sold out at the peak, actually, not just because I timed it right, but I needed the funds for a holiday in Mexico. So... It worked out for me, but A2 Milk was my first investment. Awesome. Nice.
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Chapter 4: What are the real-world applications of satellite internet?
The first one is really to do with what we call in the industry launch costs. So launch costs have fallen over time. As it sounds, it's the cost to launch a rocket into space. So to give you a few numbers, we all know SpaceX, they have a few rockets. So Falcon 9, that's one of their rockets. The launch cost back in the 2010s was around $12,000 per kilogram.
Now that's come down to a range of $2,000 to $4,000. So from a percentage perspective, that's really come down a lot. And with the new sort of rockets out there, again, owned by SpaceX, Starship, that's expected to go down to even $200 to $400 per kilogram. So it's an insane amount that we've come down. And the math is very simple. If launch costs fall, you can send more stuff into space.
And we've actually seen that in a chart that I looked at online. So you've got falling launch costs. We've also got improving just technology in general. So what I mean by that is the bandwidth per satellite is increasing. That means you need typically fewer satellites to put into orbit as well. So naturally, that's given a lot more coverage for underserved regions in the world.
So think about internet in places like Africa or even in the ocean as well for maritime vessels.
Chapter 5: What companies are leading in data-as-a-service in space?
I mean, the other two factors, private capital, as we know, continues to fund the industry. That's been another driver behind the space theme as well. Also, just demand. So I kind of mentioned, we've got about 2.9 billion people on Earth that don't have access to internet. Three quarters of the world is water.
And we know on water, there's a lot of shipment through vessels and maritime that occurs. And again, they actually need internet services. So... Yeah, I think those are four key drivers and that's really putting space at the limelight today as a potential investment thing that investors can look into.
Yeah, it's a classic example of Jevons paradox where it's like as the efficiency of the way we use a resource increases, and in this case, like the cost comes down because we get so much more efficient.
Yeah.
The amount that we use it actually goes up rather than goes down because all these new use cases emerge.
Microsoft CEO, Satya Nadella, mentioned the Jevons paradox, I think, a couple of years ago in rebuttal to the AI bubbles. Yeah, yeah, yeah. I think it's absolutely true, yeah.
Yeah.
So that's the story today, $630 billion, all these emerging use cases. The forecast by 2035 is $1.8 trillion. So where does the growth come from? What are we seeing as the big growth drivers here?
You know, government contracts are supporting companies like Rocket Lab. And we also had things like NASA's CORBS program, which is a Commercial Orbital Transportation Services, or sorry, COTS program. So this was a program throughout 2006 to 2013 that really gave, you know, private sort of companies the limelight to pursue space exploration.
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Chapter 6: Why are ETFs a good investment option for the space sector?
And each of those vessels pay $250 per month for 50 gigabytes of data. That's over $200 million in revenue just from the ships alone. And of course, Starlink provides services to countries such as Ukraine. We saw Ukraine become a massive buyer of LEO satellites from SpaceX. But also domestically, we think about Telstra. Telstra is using SpaceX's Starlink services as well.
And also the New South Wales rural fire services too. So those are a few examples of, I guess, customers. And they don't just have to be companies. They are also essential services. They are countries that really need that data for critical missions effectively. Yeah.
Well, I just think it's, you know, like my parents-in-law, shout out to Bob and Danielle, they live on a farm just outside of Forbes and they are Starlink customers just because the NBN satellite internet was so crap and Starlink is so good. I reckon their internet speeds are probably better than our internet speeds in Sydney now. Yeah, yeah, yeah.
So as the costs keep coming down, it's just like it's not just going to be the extreme use cases. It's just going to be the everyday boring use cases.
Yeah. If I might just add, you know, another key example of, I guess, everyday borrowing use cases is internet on a plane. So I actually was on a plane yesterday from Melbourne to Sydney coming back. It was a Qantas flight. And I was like, oh, cool. That's great. There's Wi-Fi actually enabled on the flight. It worked for about five minutes or so, but then the internet got really, really choppy.
And guess what I was doing on the flight? I was actually researching about rockets for this podcast. So there you go. But The internet was like disconnecting. I was like, okay, well, what type of satellites do they use? So Qantas actually use GEO satellites. These are the satellites that sit really far into orbit. So we're talking about 35,000 kilometers into orbit.
Typically, when you go high into orbit, you're going to have lower latency.
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Chapter 7: What are the emerging trends and blue-sky ideas in space investing?
And typically with GEO satellites, they're going to be a lot more applicable to things like weather and just broadcasting in general, because you've got a very fixed location. Say you wanted to provide weather forecasting services for Australia, you can stay in GEO and just stay there and provide that sort of coverage area.
But when you're talking about internet, you really need to be closer to obviously where the devices are. And so that's where things like LEO satellites, low earth orbit satellites, are extremely important. And they can sit anywhere from sort of 500 to 2000 kilometers into orbit. And we've seen airlines like Qatar Airways use LEO.
And that's why people online are saying Qatar has some of the best Wi-Fi on their plants because they're using LEO satellites. And so I was like, oh, that makes a lot of sense why my internet connection on Qantas wasn't the best experience. That's an example of a real case that people are actually using satellites in their everyday lives and they don't even know it.
So if you bring it back to today, we've covered off the data side of things, but when investors are thinking about sectors or sub-sectors that they can be investing in, or at least thinking about, what else is there to consider?
Yeah, I think the other area of space that investors can consider is satellite manufacturing. Of course, someone has to actually build the satellites to actually go into orbit. I mentioned Planet Labs as a data software provider. Interestingly, they actually make their own satellites. So they make a satellite called CubeSat. It's a very small satellite.
We're talking literally a cube, which is why it's called CubeSat. It's about 10 by 10 by 30 centimetres. But they don't just put the one in. So what they do is they build a constellation of probably chucking 150 to 200 of the small ones. And then they have this constellation that they effectively bring up into orbit.
And so you'll increasingly find a lot of companies within the industry becoming vertically integrated because some companies like Rocket Lab also do manufacturing of their own satellites too. When you talk about sub-industries, you have some pure players and you have some that are, again, they're becoming vertically integrated.
So they're doing a lot of things in-house and SpaceX is a great example. They're kind of across that value chain.
One that gets the headlines, but I don't know if there's a lot of substance, is tourism. Yes. Where are we at with space tourism?
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Chapter 8: What advice does the guest have for investors in the space sector?
But in terms of, you know, broad commercialization, as we've talked about right now today, it's all about connectivity. Because I mentioned the billions of people out there in the world with no access to internet. And, you know, that's effectively going to be a key revenue driver, I think, for the space economy today.
Now, we're keen to get into some of the more out there and blue sky ideas, but I think just to close out the space economy today, we've covered earth observation. You mentioned environmental monitoring and obviously communications and internet. You also mentioned agriculture as well. Is there anything else we should cover?
Things like GPS, navigation, anything like defense and intelligence related that's worth- painting the picture of the space industry.
Yeah, I think you're absolutely right. I think that, of course, weather, we use apps on our phones to check the weather every day, and part of that is used by satellite technology. Defense is another big one, and in a world increasingly driven by geopolitics, definitely these satellite providers are seeing a lot of real tailwinds.
Some of these providers are actually providing or tracking ship vessel movements throughout the Stratiform Moose. Again, that's quite a poignant topic. You've got defense and you also got GPS and navigation, as you mentioned, too. That's absolutely a key driver that we're seeing. With that sort of use case, typically we see MEO satellites being used.
Those are the ones that sit between LEO and GEO satellites, kind of right in that sweet spot.
All right, let's get to the fun stuff. The space economy is expected to go from 600 billion, rough, rough, to 1.8 trillion. It's going to 3X in, what, 10 years. To see that growth rate, we're going to see some crazy things coming down the pike. So we've got a bit of a game. We want you to blind rank the space economy.
And so we've got five real businesses that are working on real things related to the space economy.
uh we want you to rank them one to five as investments things that you would want to invest in personally and you're not going to know what's coming next one at a time one all right we'll go one for one i'll kick it off we'll kick off with uh one of the less out there ones uh impulse space is a company that is building space tugs that move satellites between different orbits
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