SPK - Spark NZ

[Left Field]

Good news signalled for holders yesterday..... increased divvy a possibility.

https://www.nzx.com/announcements/395197

Spark announces sale of 70% of TowerCo business for $900 million

Spark New Zealand today announced the Ontario Teachers' Pension Plan Board ("Ontario Teachers'") will acquire a 70% interest in its TowerCo business.

Spark's TowerCo business ("TowerCo") is a leading New Zealand towers business with approximately 1,263 sites. The transaction values the business at $1.175 billion, representing a FY23 pro-forma EBITDA multiple of 33.8x(1).

Spark expects net cash proceeds(2) of $900 million at completion, which is subject to Overseas Investment Office approval, and is anticipated to occur in the first half of FY23.

[Plata]

They got a pretty impressive price for it. Where do you think they will reinvest the proceeds to increase earnings to allow increasing the dividend? Maybe a larger foray into the data centre industry?

[Left Field]

They got a pretty impressive price for it. Where do you think they will reinvest the proceeds to increase earnings to allow increasing the dividend? Maybe a larger foray into the data centre industry?

Crikey, they could buy SKT! 

Seriously the logical thing would be to use the funds for a multiple of initiatives eg reduce debt, strengthen their Balance Sheet, pay a few more cents in divies, and yes invest in new revenue growth opportunities such as data centres etc.

Interesting times ahead for holders.

[kiwi2007]

Seems to be lots of interest before Wednesday's results. Not been this high for 22 years I think?

Fully valued @ 5.33?

[Left Field]

Results out...... I reckon holders will be happy.... nice path to future Divvy growth. Safe and sound. Share buy back a good sign.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SPK/397478/377291.pdf

"Spark's transition from its traditional telecommunications heritage to a more diversified and higher growth digital services provider continues at pace. As we look to FY23 we have confidence in Spark's ability to grow free cash flow to ~$460-$500 million to fund our ordinary dividend. As a result, we are guiding to a total FY23 dividend of 27 cents, 100% imputed, funded through earnings and free cash flow growth. This is the first time the total dividend has increased since 2016 and reflects the confidence we have in Spark's strategy and future growth potential."

As announced in July, Spark has reached agreement to sell a 70% stake in its TowerCo business to the Ontario Teachers' Pension Plan (OTPP). Spark expects net cash proceeds4 of ~$900 million at completion, which is conditional on Overseas Investment Office approval and anticipated to occur in the first half of FY23.

Justine continued, "Following completion of the TowerCo transaction up to $350 million will be returned to shareholders, which we intend to deliver through an on-market share buy-back. This will be subject to market conditions at the time, and we may investigate alternative return options.

"A further $350 million will be invested in future growth opportunities, such as digital infrastructure, scaling Spark Health and Spark IoT, and accelerating the commercialisation of emerging technology, such as digital identity and verifiable data through our subsidiary MATTR.

[kiwi2007]

One advantage of dealing thro' ASB is access to MorningStar (though some would argue it's more of a disadvantage ;o) .

Mobile Provides the Spark While Tower Provides the Capital

We lift our fair value estimate for narrow-moat Spark New Zealand by 4% to NZD 4.70 per share (AUD 4.20 at current exchange rates), reflecting the mobile-driven upgrades to our earnings expectations.

While the 3% rise in fiscal 2022 EBITDAI to NZD 1,150 million was in line with our expectations, the mobile result was stellar. Not only was service revenue up a market-topping 5% to NZD 886 million, but overall mobile gross margin surged to 66.9% (from 63.8% a year ago) as better data analytics reduced product costs. Underlying mobile EBITDAI margin is likely to have enjoyed similar expansion, driven by perennial efficiency improvements.

Mobile drives the circa 3% upgrade to our forward EBITDAI forecasts, with our fiscal 2023 expectation of NZD 1,212 million within management guidance. The robust 5% growth forecast is underpinned by our forecast 6% increase in mobile service revenue, partly aided by the return of around NZD 30 million in high-margin roaming revenue (60% of pre-COVID-19 levels).

We also lift our DPS forecasts to NZD 0.27 in future years. The group detailed its new 60% to 80% payout policy from free cash flow, sanitised of working capital movements—a novel concept in free cash flow definition. However, in practice, we believe Spark has set the DPS base at NZD 0.27 (the first increase since fiscal 2016). The goal is to at least maintain this to appease the group's largely dividend-focused shareholders.

The circa NZD 500 million a year required to pay the NZD 0.27 dividend, up from circa NZD 460 million previously for the NZD 0.25 dividend, can be funded largely from operations. Periodic shortfalls (due to growth capital expenditure and working capital volatility) can be covered by balance sheet. Net debt/EBITDA is 1.3, and the new capital management framework indicates Spark is willing to lift its comfort threshold above the present 1.4 target, if need be. That is before we factor in the capital flexibility to be provided by the TowerCo sales proceeds.

REDUCE $4.70

[lorraina]

Ladies and Gentlemen.Take your SPK target price pick.
Morning star $4.70.
Craigs ......$5.18
Market Screener high.$5.90
Market Screener low .$4.60
Share price at close today $5.38
Lorraina......Happy with any of the above..,,.lol.
Only thing every one can agree on is SPK are going to increase their divie.

[Left Field]

Latest update

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SPF/416561/400646.pdf

Forecast EBITAI for FY24 lower than FY23..... but FY 23 boosted by the Tower Co sale.

Percy / Lorraina will be happy......FY23 dividend of 27cps,100% imputed – an increase of 2cps vs. FY22

[Breezy]

Hardly ever talked about this stock because its so boring but one of the safest stocks on the NZX IMO, current prices looking very attractive and a great yield to boot. Weakness of late appears to be end of year tax loss selling to me. Disc-Hold quite a few.

[seaweed]

Hardly ever talked about this stock because its so boring but one of the safest stocks on the NZX IMO, current prices looking very attractive and a great yield to boot. Weakness of late appears to be end of year tax loss selling to me. Disc-Hold quite a few.

Hi Breezy, am thinking the same and have started stocking up SPKs in last few weeks. What a dream to trade compared to HLG. The NZX opens at 3pm here in California and closes at 10pm the previous day. It is now over here 4.10pm Monday 15/4/24.   

[Breezy]

Hi Breezy, am thinking the same and have started stocking up SPKs in last few weeks. What a dream to trade compared to HLG. The NZX opens at 3pm here in California and closes at 10pm the previous day. It is now over here 4.10pm Monday 15/4/24.   

User friendly trading hours for you compared to trying to trade the US from NZ. Yep big liquidity with reasonable volatility make it a great stock to trade, its a well used money parking spot for overseas punters as a currency hedge.

[kiwi2007]

https://www.tradingview.com/news/marketindex:58b311251094b:0-the-10-most-overbought-and-oversold-asx-200-stocks-week-16/

The oversold list continues to feature a number of recurring names such as Spark New Zealand, IDP Education, and Aristocrat Leisure. The stocks have all sold off for various reasons ... but serve as a reminder that once a stock ends up in deep oversold territory – it often lingers there for a while.

[Breezy]

https://www.tradingview.com/news/marketindex:58b311251094b:0-the-10-most-overbought-and-oversold-asx-200-stocks-week-16/

The oversold list continues to feature a number of recurring names such as Spark New Zealand, IDP Education, and Aristocrat Leisure. The stocks have all sold off for various reasons ... but serve as a reminder that once a stock ends up in deep oversold territory – it often lingers there for a while.

Doesnt matter with SPK how long it stays oversold for as its keeps spitting out consistent dividends. Also great buying opportunity.

[kiwi2007]

Spark, according to Solly of Upper Harbour Management, is susceptible to the half-yearly review of the MSCI Large Cap Index.
Explains a bit of the weakness.

[Left Field]

Spoiler alert..... I don't hold SPK, ( but own Vodafone via IFT)

That said, I've enjoyed reading Snoopy's recent SPK posts on the other chanel.  Check them out. He rates SPK as a possible buy or top-up at current low SP levels.

SPK has been a good Div/yield stock to-date for holders, however these dividends have arguably been supported by SPK's history of asset sales. IMO the question that needs to be asked is how sustainable are SPK's divvies going forward?  This Q also possibly explains a little of SPK's recent SP weakness.