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EARTHLINK HOLDINGS CORP
EARTHLINK HOLDINGS CORP
Panmure Research - Investment Funds 02-11-15
02 Nov 15
In our opinion, North American Energy Infrastructure (NAEI) can be viewed as either a high yield equity income growth or infrastructure subsector of the North American equity marketsNAEI vehicles offer steady, unexciting, prospects (c3-10% growth) that aren't naturally hot. In compensation, they distribute 60% plus of their earnings giving rise to 3-7% dividend yields (the higher the coupon the lower the dividend growth) as a way of attracting investor interest and new capital (debt/equity) to finance growth. Over the last decade the Alerian index (an imperfect proxy for NAEI vehicles) has delivered dividend growth of by c4.9%pa and a TSR of 8.2%pa. During this period, the index's yield widened from 6.0% to 8.3% and during 2015 the index has under gone a sharp correctionThe NAEI subsector comprises the provision of non-cyclical utility type economically critical infrastructure (Oil, Gas, and Electric) to commercial customers within a regulatory framework.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
Visible benefits from restructuring
23 Feb 17
In our view, Monitise’s H1 17 results demonstrate the benefits of management’s ongoing transformation programme. EBITDA profitability was sustained, and accompanied by cash outflow more than halving vs H1 16A. With gross cash at £27.3m, the group’s financial position remains strong. Initial FINkit sales are under “active discussion” and ongoing regulatory initiatives (CMA, PSD2) give further grounds for optimism in the outlook.
Joy of Techs
21 Nov 16
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
Ready to dominate TV distribution and prepared for new competition from Iliad
20 Feb 17
TI has released a good set of Q4 results: Revenues were up organically by 0.8% yoy (vs -5.2% in Q1, -4.2% in Q2 and -1.2% in Q3) while the EBITDA (excluding the negative impact of non-recurring items) has increased sharply by 5.9% yoy as in Q3 but vs a decline of 1.7% in H1! EBITDA has clearly benefited from the actions implemented in the “cost recovery plan” that started in Q2 in the Domestic Business and in Q3 in the Brazil Business. In Italy, revenues were up by 2.7% yoy (vs +1% in Q3 and -1.7% in the H1). The solid, structural recovery of Mobile revenues was confirmed, thanks both to the maintenance of market share and the stabilisation of ARPU levels. But the key point is the EBITDA which has grown by 8.4% (vs 7.9% in Q3, +6.9% in Q2 and -5.2% in Q1). Excluding non-recurring restructuring charges, EBITDA would have grown by +4.5% in 2016, with an EBITDA margin of 45.9%, up 1.9ppts on 2015. In Brazil, Q4 revenues were down organically and at constant change by only 1.7% yoy (vs -5.2% in Q3 and -14% in H1)! The main issue is that the total number of subscribers (c.63m with a market share of 26%) was still down by 4.3% vs end 2015. Note, however, that like its competitors the group has seen its prepaid customer base contract sharply in 2016, due to the adoption of a restrictive policy for the disconnection of inactive customers according to Anatel’s new criteria (the Brazilian National Telecommunications Agency). Q4 EBITDA was up by 2.8% yoy (vs +0.5% in Q3 and -10.9% in H1) with the start in Q3 of cost-cutting operations.
4.6% yoy EBITDA growth in Q4!
23 Feb 17
Q4 revenues have grown organically by 1% yoy. This is quite a good performance, slightly better than the market’s expectations. Remember, revenues had increased by 0.3% during H1 and by 0.8% in Q3. As in Q3, growth was remarkable in Spain (+7.9%), led by mobile services and mobile equipment sales, while the growth in fixed broadband continued to be strong with the success of fibre (1.45m customers at end 2016). In France, revenues declined by only 0.8% yoy, the impact of roaming being completely offset by a clear improvement in the mobile trend. Q4 EBITDA rose by 4.6% yoy (corresponding to a margin of 31.3%), tied to revenue growth and a reduction in labour expenses (with the average number of full-time equivalent employees falling 2.8% in the quarter). This is a good performance as it was merely stable during H1. With no surprise the group has set an objective for 2017 of a higher EBITDA than in 2016 on a comparable basis (lifted by the strong commercial momentum supported by capex, and continuing efforts to transform the cost structure). With no surprise, the group will propose the payment of a dividend of €0.60 per share for 2016 but of €0.65 for…2017.
Slight upgrade in the synergy target for 2019
22 Feb 17
Q4 revenues showed a slight continued decline with a yoy decrease of 6% to €1,936m (vs a 5.7% yoy decline during the first 9m). Note that, as in the previous quarter, this is mainly a result of the decline in handset revenues. Handset revenues fell by 17.6% yoy, reflecting longer replacement cycles and handset saturation in the German market. The key point is that Mobile service revenues (which represent 75% of the global business) declined by only 2.1% yoy in Q4, as in previous quarters, and by only 0.9% excluding the effects of the mobile termination and roaming rate cuts. As in the previous quarter, the good news is the EBITDA growth of 5.3% yoy (+3.8% for the whole year), thanks to the successful capture of synergies (mainly related to employee restructuring). Management has given its outlook for 2017: absolutely no surprise with slightly negative to flat yoy mobile service revenues and a flat to mid single-digit percentage growth for EBITDA.