1) PTL's revenue growth, being 5, 32 and 42, now 26.5, at the halfway mark. Extrapolating FY03 growth over FY02, and you get ~1/3 increase YoY. If repeated for FY04, you will get $56M, meaning, that H2 = ~$30M, and H1 = $26.5M.
2) Less than 6 months ago, PTL were predicting annualised revenues of $70M (then and there), or approaching $100M (then and there). But this has not yet occurred. Maybe, later. But not, now. Not currently, as we speak.
3) No-one has yet explained the discrepancy in customer numbers (down 6,000 from 16,000 in August, to 10,000, now). This is important, as without adequate explanation, the suggestion could be (a) loss of business, (b) poor choice of customer (ie: low yielding, since migrated off the PTL service), or (c) high churn.
4) Governance is to be applauded. But this still has not prevented substantive forecasts being made which are then widely missed. Marland is sufficiently cluey that he will include sufficient "outs" to cover off against any missed forecast. So, sticking by the numbers is something which will be broadly overlooked assuming that the business still grows (once merged together).
5) My beef is with the extent to which SWT is being diluted in respect of a merged business operation where it brings more to the table than the mooted 35% share that the existing SWT shareholders will be eventually left with. Yes, the gains will still be there, but the transfer effect will certainly favour PTL by a wide margin. In effect, the existing SWT shareholders will end up subsidising the PTL shareholders once the merger is complete.
6) The primary valuation comparison is due to iiNet. However, iiNet is profitable, has a growing revenue base, is attacking a niche (ie: dial-up) which other players are abandoning /migrating away from, has acquired a number of smaller ISPs and is in the process of securing the associated cost savings /economies of scale, has a very tight share register which generally exaggerates the share price (ie: top 20% own 90%), and is looking at further expansion during 2004. iiNet's profit, when measured on a p/e basis, is high (~25x p/e), but is closer to 8x p/e when measured on an EBITDA basis, meaning that it is fully valued, but not over-valued, relative to actual earnings.
7) SWT and PTL have grown their market share, but even so, the growth has been off very small bases, meaning that the trends have been exaggerated. Telstra's growth has been minimal by comparison, but even so, its actual increase in revenue has still been 5-6x that of the fully aggregated and FY04+ forecast SWT/PTL group.
8) Telstra's profit is still close to $4.0 Billion which justifies its share price. The combined SWT /PTL group profit is <$2.0M. That's 2,000x the difference.
9) The bulk (>95%) of PTL's value is intangible in nature, meaning that ~$34.5M is being paid for the intellectual and marketing capacity of the PTL team, and for their customer list.
10) At the moment, the following is my view of the Australian telecoms business are: TEL = BUY (I hold) TLS = HOLD (I hold) SGT = BUY (I hold) HTA = HOLD (I hold Hutchison Whampoa, but not HTA) iiNET = HOLD (I do not hold = DNH) I regard UEC (DNH), Unwired (DNH), PWT (DNH), MUL (DNH) as SELLs, whilst, personally, most of my telecoms portfolio (>90%) is overseas based (in a 60:30:10 bias favouring Europe over the USA and then Asia).
The point of the debate, SWT is paying over the odds to acquire PTL, and PTL is securing control of SWT on a cheaper valuation than should otherwise be the case.
SWT's contribution to the merged entity (underlying profit and margin wise) is greater than the 35% being attributed to it under the proposed merger arrangements.
For the moment, however, scant details of the merger proposition have been provided.
Where I differ from the majority is in terms of wanting to properly understand the profit proposition. Revenue /growth means nothing without profit (now, or in the near term).
