SPK - Spark NZ

[Basil]

No offense but I see your $2.30 mention as nonsense

Ben Graham reckoned no growth stocks are worth a PE of no more than 8.5
According to market screener the average of 9 analysts has eps forecasted at 22.5 cps in FY27, much the same as the 21.9 cps earned 5 years earlier in FY22.  So no growth in 5 years and eps of 22.5 cps.
Ben would say such a company is worth 8.5 times 22.5 cps = $1.91.  But he was just a silly old fool and they didn't have data centers back then so this time its completely different eh and you're far cleverer than he ever was .

[Breezy]

Ben Graham reckoned no growth stocks are worth a PE of no more than 8.5
According to market screener the average of 9 analysts has eps forecasted at 22.5 cps in FY27, much the same as the 21.9 cps earned 5 years earlier in FY22.  So no growth in 5 years and eps of 22.5 cps.
Ben would say such a company is worth 8.5 times 22.5 cps = $1.91.  But he was just a silly old fool and they didn't have data centers back then so this time its completely different eh and you're far cleverer than he ever was .

Stop making it personal, I don't invest in or own SPK shares for any reason to do with Ben Graham and I have no idea of his IQ score. How about focussing on your down trodden HGH stock which you actually hold or do you?

[BlackPeter]

Stop making it personal, I don't invest in or own SPK shares for any reason to do with Ben Graham and I have no idea of his IQ score. How about focussing on your down trodden HGH stock which you actually hold or do you?

I suggest you should handwrite your first paragraph hundred times, memorize it and then ask for forgiveness.

Quite personal, offensive and - if I may say so, quite dumb post.

Ben Graham was one of Warren Buffetts teachers - just look at how this worked out for him :p ); Ah yes, but you probably don't know either who Warren Buffett is, do you?

But apart from that - plain common sense would tell you that investors expect from a higher risk investment long term a higher return than they can get from (basically risk free) Kiwi-bonds. But maybe you don't know common sense either?

Spark could pay this increased reward in future only if they print the money they need to pay their dividends in their cellar - and I doubt this would be in the long run a sustainable strategy.

[LoungeLizard]

Ben Graham reckoned no growth stocks are worth a PE of no more than 8.5
According to market screener the average of 9 analysts has eps forecasted at 22.5 cps in FY27, much the same as the 21.9 cps earned 5 years earlier in FY22.  So no growth in 5 years and eps of 22.5 cps.
Ben would say such a company is worth 8.5 times 22.5 cps = $1.91.  But he was just a silly old fool and they didn't have data centers back then so this time its completely different eh and you're far cleverer than he ever was .

From your posts it looks as though you ignore market analysts, and then quote them as scripture, when it suits.

And again, you seem to deride the eps and dividend history of Spark, presumably as a warning not to invest, but then you promote HGH who have cut their dividends, EPS has not just stalled but gone backwards, and as for their share price history, well lets just not mention that at all shall we? Again, there seems to be an inconsistency of approach.

Also, back of the envelope PE calculations (as employed by all good, completely independent and objective analysts) are all well and good, but they are a starting, not finishing point. They can sometimes lead one not to be able to see the wood for the trees. Or the blue chip stocks from the chancers. 

 

[Breezy]

From your posts it looks as though you ignore market analysts, and then quote them as scripture, when it suits.

And again, you seem to deride the eps and dividend history of Spark, presumably as a warning not to invest, but then you promote HGH who have cut their dividends, EPS has not just stalled but gone backwards, and as for their share price history, well lets just not mention that at all shall we? Again, there seems to be an inconsistency of approach.

Also, back of the envelope PE calculations (as employed by all good, completely independent and objective analysts) are all well and good, but they are a starting, not finishing point. They can sometimes lead one not to be able to see the wood for the trees. Or the blue chip stocks from the chancers. 

 

Runs with the hares and hunts with the hounds comes to mind.

[Breezy]

I suggest you should handwrite your first paragraph hundred times, memorize it and then ask for forgiveness.

Quite personal, offensive and - if I may say so, quite dumb post.

Ben Graham was one of Warren Buffetts teachers - just look at how this worked out for him :p ); Ah yes, but you probably don't know either who Warren Buffett is, do you?

But apart from that - plain common sense would tell you that investors expect from a higher risk investment long term a higher return than they can get from (basically risk free) Kiwi-bonds. But maybe you don't know common sense either?

Spark could pay this increased reward in future only if they print the money they need to pay their dividends in their cellar - and I doubt this would be in the long run a sustainable strategy.

What are you on about? Best not to interfere with answers to others unless you interpret the post correctly which you haven't. My post  was a response to Basil using sarcasm as a personal put down.

[Red Baron]

Spark could pay this increased reward in future only if they print the money they need to pay their dividends in their cellar - and I doubt this would be in the long run a sustainable strategy.

But but but but but but but ........
(Zorry just varming up ze Fokker triplane in ze background for a run)

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Vas not Spark ze company zhat zold zome aging metal tripods of minimal 'scrap metal value', and littered over various obscure mountain locations vor a profit of $583m (or 31.6cps) on 14th October 2022?

Ah you say a 'one off'.

But then eef you give any credence to the rantings of my 'dogmatic fur-ball foil' (whose name must not be mentioned) at that other place (whose name should not be mentioned).   He eez zaying zhat ze Spark datacentre portfolio on a DCF basis eez vorth $845.4m or

$845.4m / 1,814.2m = 46.6cps

And how much cash have Spark put into building zheir 'data-centre portvolio' zo far?   Answer $235m.  Zo ze projected profit of a zale today vould be:  $845.4m-$235m = $610.5m

Ah you counter.  Zhis $845.4m eez nothing more zhan a 'pie in ze sky' valuation!   Unlike ze 'cell towers' ze 'data centre portvolio' as valued does not yet fully exist!

To vhich I vould reply.  Yes, you are right.  But look across ze ditch to CDC, and the 'hundreds of million dollar datacentre portfolio' that has increased in value by more zhan $500m in ze three months to 30th June 2024.  Zhat CDC portfolio does not fully exist either.  Yet international investors are still prepared to pay 'over the odds' vor such data centre promises.

Now you vill say, 'Two swallows does not make a summer'

But reach back much further and remember the sale of yellow pages for $NZ2.24billion in 2007 to the Canadian Teachers Pension Fund.  Zadly for ze buyers it is no longer vorth $NZ2.24billion today.   (It is vorth noting here  zhat NZ can ztill teach Canadian teachers a lesson)!  But vrom ze point of view of Spark, or Telecom as it vas zhen, zhis vas a very lucky transaction.

Now go back to ze last 'Three Year Strategy Plan' presentation showing the CAGR return on Spark shares over the preceding three years (slide eight).  That shows Spark beating the returns of all but one of their telecommunications contempories.  The 'defeated' being Deutsche Telekom, Telecom Malayasia, BCE, Swisscom, Vodafone Group, Telstra, BT Group and Verizon, AT&T, Orange and Singtel.    I guess all of that must have been luck as vell?   

I must zay, Spark does zeem to have been a very lucky company.  You might even say ze 'basement press in the cellar' printing money has had a good run....

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Now eef you vill excuse me, I eentend to 'don my goggles' and take off.

RB

[Basil]

I don't see where the growth is going to come from.  Their data center build will have to be funded by expensive debt or capital so how do they continue to pay their current dividends while contemporaneously funding the huge capex required for that?
I don't see how the analysts are getting to the mid $4's here given the lack of projected eps growth and I don't see why this should be priced in the late teens PE when there's no material projected eps growth.
While the current yield is attractive, I think there's a real risk of it not being sustainable so its not for me but each to their own and good luck to holders. 

[LoungeLizard]

I don't see where the growth is going to come from.  Their data center build will have to be funded by expensive debt or capital so how do they continue to pay their current dividends while contemporaneously funding the huge capex required for that?
I don't see how the analysts are getting to the mid $4's here given the lack of projected eps growth and I don't see why this should be priced in the late teens PE when there's no material projected eps growth.
While the current yield is attractive, I think there's a real risk of it not being sustainable so its not for me but each to their own and good luck to holders. 

See IFT's CDC valuation and EBItDA growth for an answer to your question.

[Red Baron]

I don't see where the growth is going to come from.  Their data center build will have to be funded by expensive debt or capital so how do they continue to pay their current dividends while contemporaneously funding the huge capex required for that?

According to a zertain 'vlea ridden pup' vrom 'zum other place'.

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a/ A $30m p.a. annual reduction in IT capex as support for a shrunken IT Products division, as IT Products 'streamline their operations' (with the associated redundancies already accounted for in FY2024).
b/ $30m reduction per annum in post 5G full roll out mobile spend (mobile division) combined with
c/ Cutting the  fixed network improvement budget by $20m (once 5G is in place).  Fixed network capex has been up to invest in Multi-Access Edge Computing (MEC), which moves the computing of traffic and services from a centralized cloud to the edge of the network and closer to the customer.

This plan releases $80m in capex spend per year, which can be redirected to data centre builds.   $80m extra p.a. is likely sufficient for the proposed data centre build out, if Spark sticks to its current roll out plan with a 2031 end goal.

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No need to cut dividends if vollowing ze above 'reallocation of capex' plan.

RB

[Breezy]

I don't see where the growth is going to come from.  Their data center build will have to be funded by expensive debt or capital so how do they continue to pay their current dividends while contemporaneously funding the huge capex required for that?
I don't see how the analysts are getting to the mid $4's here given the lack of projected eps growth and I don't see why this should be priced in the late teens PE when there's no material projected eps growth.
While the current yield is attractive, I think there's a real risk of it not being sustainable so its not for me but each to their own and good luck to holders. 

You don't see so you don't hold which is fine but you have never shown any interest in this stock previously and now its become your new pet beat up.

[Basil]

The yield is currently at a level that has caught my attention but there is obviously some debate about whether that's sustainable or not.  Nothing wrong with good debate.

[Ricky Bobby]

Hey Guys, this is a good debate. Let's keep it civilised! I have been in and out of holding, more trading because of their liquidity. Div is a bonus! RB, so this redeployment of capital would be enough to cover future capex? Would u call this growth capex or maintenance capex? Does their yearly capex spend cover their depreciation? Thanks for the help everyone!

[Red Baron]

RB, so this redeployment of capital would be enough to cover future capex? Would u call this growth capex or maintenance capex? Does their yearly capex spend cover their depreciation? Thanks for the help everyone!

Vrom one RB to another!

Ze 'FY2024 results presentation' zays on page 10:
a/ "Sparks 118MW development pipeline of data centres will require $1b+ capex to finish."
b/ "Timeframe 5 to 7 years."  $1b/7= $143m per year
c/ "Datacentre capex budget for FY2025 $70m-$90m (mid point $80m)" on page 12

Potential capex redirection vrom other divisions: $30m+$30m+$20m=$80m (my post 129) added to existing budget:
($70m-$90m)+$80m = $150m-$170m.  More zhan enough to cover ze Data Centre annual $143m 'build out budget'.

Ze 'pugnacious pup' in zhat other unmentionable place has done a post on ze Spark thread zhere titled 'Capex Crisis? (post 2488).  Look and you vill see ze expenditure vent up zignificantly over FY2023 and FY2024, to cover ze roll out of 5G mobile.  Zhis expenditure vill drop back, and ze former 5G development budget vill be redirected to datacentres.  Zhis point eez not obvious unless you look back more zhan two years, as in ze Pugnacious Pup capex table.  Zhose analysts, like 'Zilly Zolly', who have not done thees and are telling their clients zhere is 'zhortage of capital' to develop datacentres are 'lazy dummkopfs' - 'vools'- and vrong!

All ze datacentre capex being talked about vill be growth capex.  Maintenance of zhose new builds zhould be minimal, at least vor a vew years.

Depreciation eez a 'non cash item'.  Zo eet eez not needed vor a 'present value of future cashflows' valuation calculation.

RB

[Left Field]

Crikey..... just checked the TA for SPK. Unrelenting. GLH's.