SPK - Spark NZ

[Ricky Bobby]

Reading through this thread, there are a couple of things weighing on the sp. missing the guidance and more importantly future Div funding. How will skp cover this in the future?

[Breezy]

Reading through this thread, there are a couple of things weighing on the sp. missing the guidance and more importantly future Div funding. How will skp cover this in the future?

Through growth in key areas and expanding in those areas/Innovation and streamlining/cost cutting. The market is a very unreliable indicator whilst its firing from the hip, see how it looks a year from now, its a wet and forget income stock for the majority of retail punters and has been for yonks.

[seaweed]

Through growth in key areas and expanding in those areas/Innovation and streamlining/cost cutting. The market is a very unreliable indicator whilst its firing from the hip, see how it looks a year from now, its a wet and forget income stock for the majority of retail punters and has been for yonks.

I joined the 3.60s wet and forget club yesterday. Hoping to make at least 50c out of this over soldness.

[LoungeLizard]

I joined the 3.60s wet and forget club yesterday. Hoping to make at least 50c out of this over soldness.

Yep, did the same 

[Left Field]

Yesterday's close $3.52 almost at its 52 week low........I'm a tab surprised the SPK SP hasn't felt some Data Centre love/appreciation following the Blackstone Aussie Data Centre purchase.

Either it's too soon....or...
... the market is showing more concerns about SPK's ability to retain Dividend yields while funding the $ hungry data centres.

Interesting to watch how this plays out.

[Glenorchy]

At 3.52 the dividend would still provide a decent yield even after a 30% hair cut.

[Left Field]

At 3.52 the dividend would still provide a decent yield even after a 30% hair cut.

Of course SPK's current Div yield is great...Divvie hunters love it..... the question the market seems to be asking is whether the current yield is sustainable as stated in post #109.

Disc - don't hold  - just watching with interest.

[Glenorchy]

I'm not talking about the current div yield I'm talking about the yield after the dividend is cut by say 30% for example. Sorry I'm not sure my comment was clear enough.

I'm saying if you buy at a price like 3.52 if the div was cut by 30% the div yield would still be well above what you can now get on a 1 year TD at a big 4 bank. If you cut the dividend by 40% the yield at a share price of 3.52 is still over 5%. So unless you think they are going to drastically drop the dividend it doesn't need to be sustainable at the current level for the yield to be ok does it? So I'm not sure that div yield would be the concern that drives it lower from here if it goes lower... and in fact even at 3.60 or 3.70 share price etc the div yield even if the dividend is cut by as much as 30 or 40% is still worthwhile in the context of a dividend portfolio imo ymmv

[Basil]

I'm saying if you buy at a price like 3.52 if the div was cut by 30% the div yield would still be well above what you can now get on a 1 year TD at a big 4 bank. If you cut the dividend by 40% the yield at a share price of 3.52 is still over 5%. So unless you think they are going to drastically drop the dividend it doesn't need to be sustainable at the current level for the yield to be ok does it?

Best to compare apples with apples because that's what the market does.  What the yield is on a different lower risk asset class, (1 year term deposit) is not what's relevant.  What yield you can get on other shares on the NZX is what's relevant. I suspect the pain of lower revenues from SPK's IT division they have recently felt, is just the beginning of that story.  Buying shares in a strong downtrend is usually not a good idea, at least in the short term.  It's got all the classic makings of a dividend trap with absolutely no prospect whatsoever of dividends ever going up.  That's how I see it. 

Quote KW in another thread.  Every man and his dog is jumping on the "lets build data centres" bandwagon.  I predict it will end in tears (for shareholders).  Because its just the same old cycle repeating - like railroads in the 1800s to fibre networks in the 2000s

I do wonder with the cost of capital so high now, how long before SPK's data center will be eps accretive ?

[Breezy]

Non holders shouldn't concern themselves about SPK, great long term hold, just spray and walk away.
Such a gift for those able to buy at current insanely discounted prices.
Bet the price will be well north of where it is now in a couple of yrs time.

[Glenorchy]

Best to compare apples with apples because that's what the market does.  What the yield is on a different lower risk asset class, (1 year term deposit) is not what's relevant.  What yield you can get on other shares on the NZX is what's relevant. I suspect the pain of lower revenues from SPK's IT division they have recently felt, is just the beginning of that story.  Buying shares in a strong downtrend is usually not a good idea, at least in the short term.  It's got all the classic makings of a dividend trap with absolutely no prospect whatsoever of dividends ever going up.  That's how I see it.   

Fair enough.

I view Spark as a bond-proxy and so sensitive to interest rates and TD's are just one weather vane of interest rate direction and levels. Of course Spark is not the same as a TD.

If you want to compare Spark with other equities:

At the current dividend if the SP was $3.60 (and it's currentky $3.52)  Spark would have the highest dividend yield on the NZX.

If you cut it's dividend by 30% at a SP of $3.60 it would have the 12th highest dividend yield and how sustainable a few above it are, is equally dubious.

The overall point stands. Clearly there are many who agree with your view it is being savagely sold down hardly a vote of confidence in it's prospects but I am not sure concerns about the sustainability of it's yield fully explain the sell-off.

I am watching it carefully I have not pulled the trigger but it's definitely of interest to me for my income portfolio. I appreciate it's not for everyone.

[BlackPeter]

Non holders shouldn't concern themselves about SPK, great long term hold, just spray and walk away.
Such a gift for those able to buy at current insanely discounted prices.
Bet the price will be well north of where it is now in a couple of yrs time.

It might be educational to review the posts in other threads where the share price is (or was) going downhill. The posts of the supporters all sound similar ... and while I can understand if there are arguments about fundamental value (the market does have a habit of under as well as overpricing assets), the fact that a share used to be more expensive in the past is never a good argument for calling it "discounted". Always consider that the market might  just have overvalued the asset in the past (like e.g. with SML or ATM) or the fundamentals might have changed.

Why exactly do you think that Spark is currently discounted? The PE is still above 15 (at SP $3.52) and the historic earnings growth per share is slightly negative. I don't see a reason why this should change either. Trim the price to 2/3rds of the current value (i.e. around $2.30) - and it is still not cheap, but at least fairly priced.   

[Breezy]

It might be educational to review the posts in other threads where the share price is (or was) going downhill. The posts of the supporters all sound similar ... and while I can understand if there are arguments about fundamental value (the market does have a habit of under as well as overpricing assets), the fact that a share used to be more expensive in the past is never a good argument for calling it "discounted". Always consider that the market might  just have overvalued the asset in the past (like e.g. with SML or ATM) or the fundamentals might have changed.

Why exactly do you think that Spark is currently discounted? The PE is still above 15 (at SP $3.52) and the historic earnings growth per share is slightly negative. I don't see a reason why this should change either. Trim the price to 2/3rds of the current value (i.e. around $2.30) - and it is still not cheap, but at least fairly priced.   

The market does what it does, it overshoots and undershoots and every now and then it even gets it just right
I see it back to around $4.50 within 2 yrs so as a long term hold I'm completely unfazed by the current time of instability.
No offense but I see your $2.30 mention as nonsense just as I saw some mentioning FPH as only being worth $10-$15 as nonsense.

[Basil]

https://www.marketscreener.com/quote/stock/SPARK-NEW-ZEALAND-LIMITED-6492600/consensus/
Oddly enough the average of 9 analysts agree with you and have an average target price of $4.62
Good luck with getting ATM up to your price target of $30 though.

[Breezy]

https://www.marketscreener.com/quote/stock/SPARK-NEW-ZEALAND-LIMITED-6492600/consensus/
Oddly enough the average of 9 analysts agree with you and have an average target price of $4.62
Good luck with getting ATM up to your price target of $30 though.

I highly doubt anyone including myself has had a tp of $30 for ATM for many years now, it was once a possibility on its growth trajectory at the time.