I know its popular but I always struggle with this approach. Do you have better places to put the capital or is it a risk mitigation thing?
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A very puzzling stock on a ludicrous PE ratio which cant be explained.
PE ratio is not the right way to value Chorus - capex is still high, but will end in the next 1-2 years, depreciation (non-cash) is high and increasing, and this diminishes the E. Free cash flow will increase substantially once the capex ends
Discl - recently invested
That's the way I see it too. Large CAPEX on the UFB roll out coming to an end in the next 1-2 years and a resulting huge increase in free cash flow from less CAPEX and high depreciation charges. Most forecasts showing dividends doubling from current 24c to 50-60c by 20023-2024.
Of course there are downside risks from wireless broadband and potentially 5G. Also potentially a big overhang from Crown Infrastructure Partners should they want to exit their stake post UFB completion.
Discl:
A small holding for current and future dividends
What I don't get with Chorus is that they play up the increasing data use on the fibre network as a good thing.
They don't get paid on data throughput - in fact increased data means that they have to upgrade parts of their network to avoid congestion = more cost.
They get paid on connections and Spark, at least, is trying to reduce the number of those they use.