We update the NSR GEM Top Picks list. No stocks are dropped, and we add LILAC and TIM Brasil to our list, extending it to a Top-10 list from Top-8. Our picks had a good start, up 12% on average since the start of the year. This note also includes key news & other thoughts in order to help investors generate alpha within the EM Telco space.
Liberty LA announced this week that AMX will take control of their 50/50 JV in Chile. This isn’t surprising but still cements a good “exit” for Liberty LA (putting zero value on the residual 9% stake this implies a 15.5x exit on FY 23 VTR EBITDA) and requiring a long-term perspective from AMX in order to turnaround the business - though we note recent top line and KPIs look to be (finally) stabilising.
Updating estimates for Q1 we feel much better about hitting expectations for the FCF turnaround. CEO Balan Nair was sounding upbeat on the earnings call about hitting the $45m of monthly EBITDA in Puerto Rico, in our view (crucial to group FCF improvement), and we look at how to bridge that outlook from the reported Q1 number. We push up 2025 Puerto Rico EBITDA.
VTR in Chile has disclosed the contribution of a convertible shareholder loan of $600m for AMX and LILA’s Chilean JV (ClaroVTR). It’s not clear that LILA has contributed its pro rata share (we’ll know at the Q2s) and the release suggests that conversion of the loans might not be in proportion to current equity levels (50/50) paving the way we think for AMX to take control of the JV over time.
Liberty LA reported Q1s after close. Numbers were in-line at revenue and a touch ahead of us at EBITDA, with a slight sequential recovery in Puerto Rico margins and better profitability in Costa Rica offsetting (ongoing) weakness in Panama.
Expansión newspaper in Chile is reporting that Entel is selling its FTTH infrastructure (~1m HPs) to the local Telefonica / KKR JV. Following the Liberty LA / AMX deal, this would be the second major infra consolidation in a market crying out for repair; we update our map of fixed infrastructure deployment in Chile in this short note and suspect the market will likely coalesce around three infra providers (seven historically).
We publish today our take on the LatAm Telcos Q1 earnings season. As well as our broader note which picks out key themes and market by market insights, we also publish for the first time a summary of our database which looks at key financials and operational KPIs on a country level basis - see LatAm Telcos Quarterly Databank.
Liberty LA reported Q3s after close. Adjusting out for the acquisition of Costa Rica (which contributed more than we expected), revenue missed by 1% and EBITDA missed by 2.5%. The small miss was a combination of the former AT&T wireless business in PR (Liberty Mobile) slowing dramatically (even more than anticipated) and with a much lower underlying EBITDA margin (almost a 10pp swing from Q2).
Liberty LA has announced a deal with AMX in Chile. We spoke to CFO Chris Noyes and ran through the deal rationale which all seems logical, following on the back of the recent Panama deal also with AMX (less material but also a sensible transaction).
Liberty LA has announced another in-market deal today, buying out America Movil’s wireless asset in Panama. The deal will see the market go from 4 to 3 and follows recent in-market (and F-M) deals in Puerto Rico and Costa Rica, at sensible multiples, helping build Balan’s track record in M&A. We take a first cut of running the numbers, seeing accretion from 2023 and no implications for the buy back. Maintain Buy
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
We hosted a Fireside chat with Chris Noyes, CFO of Liberty Latin America, yesterday. Focus was on Subsea monetisation (early days we think) and a potential Buy Back (from later this year, absent M&A, potentially) and we run the numbers on both: seeing 25% accretion to EFCF/share in 2024e.
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