I think I relaized we are on totally different wavelengths when i saw you have listed TLS as a buy. For me it is an obvious long term sell, based on first on technical indicators. Also on what I see is the future for its business ie - VOIP eroding the cash cow part of its business (timed std), increased internationally backed competition, govt policy etc etc etc. As a value stocks I can see the merits, but would never hold TLS long term. So we have completely differnt viewpoints on telcos. I have discussed this with a reasonably highly placed employee of TLS, and they can appreciate their own difficulty, and hope to offset the reduction in timed STD and other forms of traditional income with gains in other areas. Im not hopeful. I wont say his own opinion.
To answer yours..
Question 1. Extrapolate FY 01 over FY 02 = 600%. So why just concentrate on that one year. (FY 02/03). And again i come back to COlin Marlands comments on Friday, thats our most recent info...they don't expect any big change over their forecast.
Question 2 : They still are..see Colin Marland's comments on his question and answer forum. If you believe he is lyeing, then its worth takeing him up on it or presenting your facts to ASIC now and nipping it in the bud.
Question 3 : Can you tell me where you got the refernece to customer numbers 6 months ago? Was it a MUL ann..can you give me a date?
Question 4: Agree with you. Thats why Colin Marland saying revenue figures on track is more to be believed.
Question 5 : Disagree. Depends on the valuation we use, but most simply, we are getting 1/3 of People Telecom and SWT, yet People Telecom is much larger ( if we use their own figures for this year) , and has a broader business base. Diluting company by 2/3, but getting a company 6-8 times larger...im yet to be convinced otherwise.
Question 6 : I think shows bias. You say 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. "
SWT has all of those things, and is now expanding to include a brader revenue base with PTL. I think on most criteria, SWT has done better than IIN . They have expanded much faster. That has been at the expense of profit, but they have paid for a network while increasing capacity about 500%. First investement and growth, then rewards..company model.
Question 7 : I dont think you can even begin to compare TLS growths with SWT. Thats like comparing BHP with Amity Oil. Of cousre BHP is going to grow more in raw numbers, but its as a proportion of market cap that is important.
Question 8 : TLS is a mature business, should be a cash cow. So you would expect low PE, high yield. Again, its like comparing BHP with a start up miner.
Question 9 : Agreed. The same as a lot of tech sector businesses.
Question 10 : Good to see the list . SWT and SKG are my only IT holding at the moment. I sometimes trade TLS short term when it gets sufficent volatility. HTA is a watch. IIN..I cant see why it would be a buy or hold but I havent looked into it fully. Seems more than fully priced, although it has come off a bit. TEL i dont know. SGT Has to be better than TLS but i dont hold and havent looked into fully.
Hi extralite,
Some quick observations:
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). All the best, Grant62
