SPK - Spark NZ

[Basil]

Fair enough. 

[entrep]

I almost spat my coffee out reading this absolutely savage call

Never held but could be interested if it halves again and goes down to 7 times EPS of 13.55 cps = approx $1.

[LoungeLizard]

Yep, there were plenty of people who were pressing the alarm button when Spark went from $5 to $4 to $3 to $2.

Unlike others though I think $2 was the bottom. We'd better all go home if NZ's NO.1 telecommunications company could be worth only $1 per share.
 
As for the downtrend - well it depends when you start you start plotting your graph doesn't it? Three weeks ago Spark was in an uptrend reaching $2.34 from memory. The current slip is mainly due to investor nervousness surrounding the mid-year results on 18/2. Those results aren't likely to be great for those thinking short-term, but long term investors will be looking for signs that the cost cutting, selling of non-core assets and re-focussing on their connectivity business is starting to bear fruit.

I don't think SPK is a dividend trap at all - the numbers have been crunched and 15-17c is sustainable whilst the restructuring goes on. Should that be successful then I see Spark moving slowly up to a target price (Morningstar) of $3.60. How long that will take is anyone's guess, but the yield is attractive and, as I say, sustainable in the meantime.

[Basil]

That's sort of what I'm saying - the quite extraordinary dip in the SP of infrastructure stock has very little to do with company performance or prospects, mostly to do with foreign investment sentiment. So yes, I'd agree  - this is great buying opportunity for companies like Spark. I've been topping up  and my average price is now $4.50, which is an absolute steal in my opinion.

Less than 2 years ago you were proclaiming SPK as an "absolute steal" at $4.50.   Just as well there's no chance of it halving again...or maybe there is...
Substantial capital destruction is what happens when you fall in love with a down trending dog. 

[LoungeLizard]

Less than 2 years ago you were proclaiming SPK as an "absolute steal" at $4.50.   Just as well there's no chance of it halving again...or maybe there is...
Substantial capital destruction is what happens when you fall in love with a down trending dog. 

All true, and I hold my hand up to that as have others. At the time it seemed like a market over-reaction to a bad set of results but then they dropped out of a few index's plus there was a bit of market manipulation going on as well as I recall.
But the past is the past. Looking forward I don't hold with your view that Spark will fall to $1. I don't think there would be many who would think that to be honest.F rom a base of $2 I see only one direction over the next few years - up. My average price is still well north of here, so theres little sense for long term holders like myself to sell and crystallise their losses, not when they're getting a reasonable yield in the meantime.
Re-convene in 2-3 years time?

[Basil]

But the past is the past. Looking forward I don't hold with your view that Spark will fall to $1.

To be crystal clear I'm not forecasting it will get to $1.  I just said it would need to get there to create some interest for me. 8.5 times next years earnings of about 15 cps = $1.27 which is all I think Spark are really worth. 

[Left Field]

All true, and I hold my hand up to that as have others. At the time it seemed like a market over-reaction to a bad set of results but then they dropped out of a few index's plus there was a bit of market manipulation going on as well as I recall.
But the past is the past. Looking forward I don't hold with your view that Spark will fall to $1. I don't think there would be many who would think that to be honest.F rom a base of $2 I see only one direction over the next few years - up. My average price is still well north of here, so theres little sense for long term holders like myself to sell and crystallise their losses, not when they're getting a reasonable yield in the meantime.
Re-convene in 2-3 years time?

IMO its better to buy into a definite uptrend ( ie change of market sentiment)  than tie good money up while waiting for the 'bottom'. 

The fact that your holding has already 'depreciated' and "is worth well north of here" (as you say) is exactly the warning many of us were trying to signal.

So good luck with your investment.

Personally I would rather wait for TA to turn around before investing in SPK.

[LoungeLizard]

IMO its better to buy into a definite uptrend ( ie change of market sentiment)  than tie good money up while waiting for the 'bottom'. 

The fact that your holding has already 'depreciated' and "is well north of here" (as you say) is exactly the warning many of us were trying to signal.

So good luck with your investment.

Personally I would rather wait for TA to turn around before investing in SPK.

Fair enough, horses for courses. I'm not one for using TA as the main determinant for buying/selling a stock, but there's many who clearly do and if it works for them then keep going. Not sure if Buffet is a TA monster - I rather think not.

One of the investing truisms is that it is about time in the market. I'm not thrilled obviously that Spark is in the red, but I've been here many times. Just about every infrastructure or "blue chip" stock I have held, has at one time or another had a year or two of decline. Admittedly not as severe as Spark, which is pretty much unprecedented. But I have always tried to look beyond the "event" and resisted the temptation to panic sell. If anything, accumulating in the dips has worked well for stocks like IFT.

Look at the 5 year charts of FPH, MFT, IFT, AIA etc. There's some sharp falls and corrections there but in the main, the line goes up over time.

In times of decline - whether it is a market correction, a poor set of results or a black swan event - you need to ask yourself is the company fundamentally the same as it was when you invested. ie what is it's intrinsic value beyond whatever has led to the downward trend. For some companies eg FBU, WHS the answer comes back no, it's not the same company as 10 years ago or even 5. Both those companies are, in my view, terminally ill for a whole raft of reasons. The others I mentioned have never once made me feel that they are in some sort of fundamental decline. If they were, I would certainly sell, but they are not. I include Spark in that.

Hindsight is a fine thing. Of course it would have been better to have sold Spark at $4.50 and bought back in now. But when the TA was against FPH and AIA (or even IFT at the moment) one could have argued the same thing, sold, and then watched the share price recover and have sellers regret. This happens time and time again - all stocks have a negative cycle at some stage. The question is whether it is temporary or permanent. For most big stocks, particularly those providing essential services, the answer is that it's usually temporary.

 Most of my stocks form part of my 20 year pension plan. I'm half way there and 90% of my stocks have grown just fine. Spark is the only one in the red, but even now - just off the bottom - I'm fine about continuing to hold becasue A) I get an ok yield (approx 5% against my average price) and B) Spark is still intrinsically the same company I invested in years ago, albeit having to fight harder for market share.

None of this will mean much for those with a short time frame, chasing a maximised dividend. Spark is the wrong stock for those on different strategy but that doesn't make it wrong stock for everyone in all circumstances.

[Buzz]

There's an interesting analysis on the other channel.

[LoungeLizard]

There's an interesting analysis on the other channel.

Yes, interesting AI analysis. The takeaway is that although OPUS  considers there are a few flaws in Snoopy's analysis leading to an over optimistic view, OPUS concludes that:

1. FY2026: ~16-17cps likely achievable (data centre proceeds provide buffer)

2. Reasonable fair value range: $2.50-$3.50 based on reduced but sustainable dividends, an appropriate equity discount rate of 8-9%, and modest recovery expectations.

Not unsurprisingly any movement up or down in the dividend or SP OPUS puts down to whether the wider NZ economy recovers. Could be said for a lot of stocks.

It's an interesting and valuable  assessment but needs to be taken with a pinch of salt. AI is only looking at data that is already known - it can't predict the future with any more certainty than us humans!

[Left Field]

..... I'm not one for using TA as the main determinant for buying/selling a stock, but there's many who clearly do and if it works for them then keep going.

Just FYI I would never advocate using TA as the main determinant for investing in the sharemarket......however I find it very, very useful as a guide for timing aquisitions/sales.

TA is particularly useful in signalling a change in sentiment in a beaten down stock. TWR and HGH were recent examples where I've used TA with success ( but alway's backed by FA to help guide me to the future returns potential.)

If you are wanting to quit or reduce a stock holding, TA is a useful tool to help get your timing right.

So definitely not a tool to be used as a 'main determinant', but definitely a useful tool.

JMHO. Each to their own.

[Shareguy]

Will be interesting as to what the market thinks of the result.

Divi 8 cps 50 % imputed and NPAT $64m (adjusted $73m) 63 % gearing.

Guidance reaffirmed.

FB had forecasted 1H26E divi at 8 cps. NPAT $93m

[Left Field]

Will be interesting as to what the market thinks of the result.

Divi 8 cps 50 % imputed and NPAT $64m (adjusted $73m) 63 % gearing.

Guidance reaffirmed.

FB had forecasted 1H26E divi at 8 cps. NPAT $93m

Here's today's market release

https://api.nzx.com/public/announcement/467668/attachment/462481/467668-462481.pdf

Plus more detailed investors presentation.... https://api.nzx.com/public/announcement/467668/attachment/462497/467668-462497.pdf

Let's hope the worst is over for SPK holders.  (As a non holder interested bystander my quick take concern would be SPK's  revenue growth.)

[LoungeLizard]

An encouraging set of results in my view. Total revenue has stabilised, NPAT and EBITDA up and first half dividend of 8c is what we expected. Another highlight is the small growth in mobile revenue, which reverses period on period decline,  together with significant cost saving.
Looks, at first glance, to be a promising set of results. Let's see how the market views it.

[Shareguy]

Insert from Craig's latest note on the result

SPK have retained their FY guidance, but as noted this includes asset sale gains. Typically these have run at $25-30m pa, so with $24m in 1H it suggests the abnormal adjustment likely for the FY guidance may be bigger than we had previously expected.  Consequently we would view it as a downgrade to 'Normalised' guidance.

They need to get their debt down. Pre abnormals EPS 2.8 cps and a divi of 8 cps.