CNU - Chorus

[futurist]

I read the above as well.
They do make a good point which maybe has been overlooked by some by jusy focusing on the UFB issue and that is "The risk of a slower take-up rate is mitigated by the existing copper network, which will continue to generate return."

I don't doubt there are certain rationales behind Morningstar's analysis and also the recommendations of the share. In fact, I don't think their target price has changed that much for the last 18 months or so. Also, Forsyth Barr recommends to accumulate and RBS Equities recommends to buy.

So forget about SP and let's take a look at the shareholding change. Comparing between 6/1/12 and 21/6/13, the total shares held by the top 100 shareholders have dropped from 90.22% to 75.97%. Guess who has gradually decreased their shareholdings?

Maybe there are no relationships between the two. I mean one person could recommend you to buy his stuff while he is selling them out, it doesn't mean his stuff is no good. But I think we should all be informed at the very least.

P.S. There are lots of laid-off going on among i-banks in the last 3 months, sometimes I think I trust that figure more than what they say.

[futurist]

You make some really really interesting points.

Another worry is in the unlikely event that Labour / Greens get in, they seem to be on a bit of a bent to reconstruct traditional monopoly sectors. At least if national stay they are somewhat tied to it with promises. I do wonder how much lower the SP can go.

The company is in a good position, it should eventually deliver a good div, but how long will this all take? And do shareholders have the willpower, or will they jump out in the interum and come back when its all looking a little more certain??

Thanks. I tend to agree with CJ that CNU is a monopoly emerged from regulatory decisions, and it will always be like that because politicians like to exercise their influences from time to time. So I would rather treat them as noise. The real signal, or the indicators I care about, would simply be revenue and cost. Could CNU generate the income they predict, and run under the projected cost? If income from UFB is debatable, what about the cost? Do you think it would go up or down or stay the same in the coming years given what is going on in the global environment?

Obviously Morningstar or others would tell us what they think, but nevertheless we should think about that too.

[CJ]

Thanks. I tend to agree with CJ that CNU is a monopoly emerged from regulatory decisions, and it will always be like that because politicians like to exercise their influences from time to time. So I would rather treat them as noise. The real signal, or the indicators I care about, would simply be revenue and cost. Could CNU generate the income they predict, and run under the projected cost? If income from UFB is debatable, what about the cost? Do you think it would go up or down or stay the same in the coming years given what is going on in the global environment?

Obviously Morningstar or others would tell us what they think, but nevertheless we should think about that too.

I dont have much concern re revenue and cost regarding UFB. My concern is on Revenue for the old copper network. ComCom wants this to be very cheap which will hinder UFB growth and cause revenues to drop.

[futurist]

I dont have much concern re revenue and cost regarding UFB. My concern is on Revenue for the old copper network. ComCom wants this to be very cheap which will hinder UFB growth and cause revenues to drop.

Fair point, and given this kind of negotiation between a regulatory agent and a regulated business would go on, how often the agent would try to do the business a favor? They are born to have an opposite view on what matters the most.

Maybe we could ask ourselves this question: what could be an element that supports a surprise of revenue shoot-up? We know the downside risk, but is there anything on the upside to balance that out?

[Silverlight]

Craigs have upgraded Chorus from a Sell to a Hold.

[futurist]

And the price rebounds accordingly...

Good one!

Craigs also chose CNU as the top pick in 2012, in which if we exclude the last month of 2012 then CNU did pretty well trading between $3 and $3.70 during the whole time. They are so accurate!

[CJ]

Maybe we could ask ourselves this question: what could be an element that supports a surprise of revenue shoot-up? We know the downside risk, but is there anything on the upside to balance that out?

I dont think you should expect a surprise revenue shoot up - it should be a constant/reliable yeild share.

The issue currently is everyone is pricing in a lower dps based on the ComCom draft pricing. Should that pricing be adjusted upwards, the share price should increase to compensate for a higher level of dps, and then revert back to a constant ~7% dividend yeild, much like Vector.

To clarify, this is not a growth share, it is a yeild share, but with a potential (short term?) value play should the ComCom pricing be overruled.

[futurist]

I dont think you should expect a surprise revenue shoot up - it should be a constant/reliable yeild share.

The issue currently is everyone is pricing in a lower dps based on the ComCom draft pricing. Should that pricing be adjusted upwards, the share price should increase to compensate for a higher level of dps, and then revert back to a constant ~7% dividend yeild, much like Vector.

To clarify, this is not a growth share, it is a yeild share, but with a potential (short term?) value play should the ComCom pricing be overruled.

I think you have answered the question: the surprise revenue shoot up is the constant and reliable yield. It is a surprise because the market is not betting on or believing that yet, hence the definition of a surprise right? It is not a surprise for a typical yield share to result with what you said (e.g. Vector-like with 7% div yield), but at this very moment, it seems to me for that to happen it requires an element of surprise (like CC pricing being overruled in August as you said).

So if we go back to my original question: why now? I think we come up with one answer: betting on the element of surprise. Otherwise if one is looking for yield, they could always buy in later instead of now. Because the yield is not going to change substantially comparing to the risk of exposure, the core rationale for buying now is not yield-oriented.

[CJ]

So if we go back to my original question: why now? Otherwise if one is looking for yield, they could always buy in later instead of now.

Why not now. Unless you think the surprise will be on the downside.

Buy now and get a good yeild, plus the potential value increase should Comcom be overruled. If you buy later, you only get the yeild.

I think your "why now" question applied to those buying above $3 where there was the risk of a downside surprise, which came when ComCom set out $8 as the price for Copper.

Disc: Bought a small amount a month or so ago and may double down if it goes lower. Never worked for (directly or indirectly) Chorus or Telecom.

[futurist]

Why not now. Unless you think the surprise will be on the downside.

Buy now and get a good yeild, plus the potential value increase should Comcom be overruled. If you buy later, you only get the yeild.

I think your "why now" question applied to those buying above $3 where there was the risk of a downside surprise, which came when ComCom set out $8 as the price for Copper.

Disc: Bought a small amount a month or so ago and may double down if it goes lower. Never worked for (directly or indirectly) Chorus or Telecom.

Okay, as long as the rationale of buy now ties with the hope of potential capital gain of course I could understand. But that to me is more based on chance. Also I don't think if someone is looking for a "Vector-like" yield share they should buy now with CNU simply because it is not a boring and yield-only share just yet as you point out. If they buy later, they will only get the yield, but perhaps that suit them better too in terms of risk tolerance.

For me, I do worry about surprise on the downside, like cost. Well I am sure as time goes we will get a better idea of labor or material costs from many companies' reports and various economic studies.

Who knows, maybe if it drops further while you would double down, I may just get in and join you as well