CNU - Chorus

[TimmyTP]

Indeed - I've tried, but can't speak Bureaucratian.

Thanks Sparky and Banksie for the interpretation.

[CJ]

Anyone want to break that all down into laymen's terms? I absolutely hate government speak and it doesn't make clear anything, as usual...

I second that.

http://www.sharechat.co.nz/article/b...ions-levy.html

Not sure exactly why Chorus has to pay this as it is not a retailer.

In theory this should be a pass through cost in a regulated industry so it shouldn't be a major but maybe it is.

[CJ]

Doesn't mean we won't see some freakouts today though!

Probably will :

http://www.stuff.co.nz/business/indu...ote-for-Chorus

[futurist]

Anyway all this crap just needs to be put to bed and lets start focussing on CNU, interesting opinion piece in stuff today:
http://www.stuff.co.nz/business/indu...ote-for-Chorus

Okay, let's forget about the debate on UFB and focus on CNU a bit more. Would you agree that we did have an amazing run of the share-market for the last 18 months? Coincidentally, multiple gigantic countries have finalised their political leaderships for another term during this period of time, which hopefully leads to some stability at the global level. While all major central banks were QE-ing which definitely increase the opacity of every market, we did pretty good, didn't we? Maybe our job level hasn't reached back to pre-crisis but both consumer and business confidences are up.

For CNU to drop its share price so much in this same period, obviously there are many theories. But let's not go into the details. Because we know as long as UFB is rolled out then it is time to cash in. Again because we agree that UFB is the future, so we could assume most people would want it enough to switch from broadband.

I have absolutely nothing against investor to stock up this share, no matter you do it for the capital gain or the dividends. We are all here for the money, aren't we? But I repeatedly question this: why now? Remember, QE-ing from the global level has in most cases flooded money into securities. That particular effect has been absent for CNU and to me that's already pretty strange if CNU's price remains the same. If it goes down during a rosy period, that means it has already been shielded from a full speed sliding down.

Maybe that does not concern you neither. Then what about the foreseeable break in QE? If CNU's share price does not benefit from QE, could it also be unaffected by its retraction? I don't know for CNU, but I am quite sure the retraction is going to affect interest rate, which affects everything including confidence. Are we sure that in a year or two time when UFB is readily available to 75% of our population, we would still in the same atmosphere as today, with the same kind of consumer confidence? In 2 years time when QE has officially stopped, the kiwi/dollar ratio would probably be very different and so would the price of petrol and many other life depending commodities.

I am just throwing some questions out here, please don't throw rocks back at me. All the best.

[RedWizzard]

On top of that there are those who are now conspicuously absent since posting the other day. Would be nice if people were honest, but hey..

Hope you don't me mean. I haven't been on for a few days and it looks like I missed something. For the record I've never been employed by Chorus or Telecom.

[Snow Leopard]

“On two occasions, I have been asked [by members of Parliament], 'Pray, Mr. Babbage, if you put into the machine wrong figures, will the right answers come out?' I am not able to rightly apprehend the kind of confusion of ideas that could provoke such a question.”


― Charles Babbage

Best Wishes
Paper Tiger

[Mista_Trix]

Okay, let's forget about the debate on UFB and focus on CNU a bit more. Would you agree that we did have an amazing run of the share-market for the last 18 months? Coincidentally, multiple gigantic countries have finalised their political leaderships for another term during this period of time, which hopefully leads to some stability at the global level. While all major central banks were QE-ing which definitely increase the opacity of every market, we did pretty good, didn't we? Maybe our job level hasn't reached back to pre-crisis but both consumer and business confidences are up.

For CNU to drop its share price so much in this same period, obviously there are many theories. But let's not go into the details. Because we know as long as UFB is rolled out then it is time to cash in. Again because we agree that UFB is the future, so we could assume most people would want it enough to switch from broadband.

I have absolutely nothing against investor to stock up this share, no matter you do it for the capital gain or the dividends. We are all here for the money, aren't we? But I repeatedly question this: why now? Remember, QE-ing from the global level has in most cases flooded money into securities. That particular effect has been absent for CNU and to me that's already pretty strange if CNU's price remains the same. If it goes down during a rosy period, that means it has already been shielded from a full speed sliding down.

Maybe that does not concern you neither. Then what about the foreseeable break in QE? If CNU's share price does not benefit from QE, could it also be unaffected by its retraction? I don't know for CNU, but I am quite sure the retraction is going to affect interest rate, which affects everything including confidence. Are we sure that in a year or two time when UFB is readily available to 75% of our population, we would still in the same atmosphere as today, with the same kind of consumer confidence? In 2 years time when QE has officially stopped, the kiwi/dollar ratio would probably be very different and so would the price of petrol and many other life depending commodities.

I am just throwing some questions out here, please don't throw rocks back at me. All the best.

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??

[CJ]

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.

I dont think this is a concern as it is already a fully regulated business. The only place to go from their is a non commercial return on assets (not viable) or making it an SOE (costly).

[biker]

This for Morningstar makes good reading! ( and yes I know there is lots of scepticism regarding Morningstar)



Latest recommendation report

Valuation: $3.60Last updated:27/06/13
Chorus' Lab Tour Highlights Strategies to Contain Rollout Costs

Investment rating

Chorus' fixed-line infrastructure assets are near monopoly and its network is costly to replicate, underpinning its narrow moat rating. We expect the roll-out of a fibre network, which covers 75% of New Zealand, to be on time and on budget. With rising data demand for rich multimedia content, we expect this to be the main driver for consumers to upgrade from copper to fibre technology. The risk of a slower take-up rate is mitigated by the existing copper network, which will continue to generate return. We believe the risk of mobile and wireless substitution to be overplayed given the technological difference and, more importantly, premium pricing for wireless on a per-unit basis.

Event
Chorus' Lab Tour Highlights Strategies to Contain Rollout


Recommendation impact (last updated: 27/06/2013)


Event analysis

Chorus' Lab Tour Highlights Strategies to Contain Rollout Costs

Chorus provided a tour of its Auckland fibre lab last month. The tour included a demonstration of fibre equipment at the exchange, a mock-up of ducts and fibre connection from the exchange to the premise, and technologies at the premise. There is no change to our NZD 3.60 fair value estimate, and our investment view is unchanged. The stock is undervalued, trading at a discount to our fair value estimate. We believe regulatory concerns on wholesale broadband prices are priced into the current share price. We expect a better outcome from the New Zealand Commerce Commission (ComCom) when the final decision is released in August. However, the regulatory uncertainty will remain a barrier for the share price to converge towards our fair value estimate in the short term. Chorus' narrow economic moat is based on efficient scale and cost advantage. Its nationwide assets are essentially monopolies, and difficult to replicate. Post fibre rollout, the company's fibre assets will cover 75% of New Zealand's population.

With capital expenditure guidance revised higher at the fiscal 2013 result in February, the focus is on strategies to lower connection costs at the initial phase of the rollout. Chorus will install terminals between the cabinets and the premise. In the initial rollout, fibre will be rolled out from the cabinets to the terminals to defer upfront investments. The remaining fibre is laid on demand when a customer signs up to a fibre service. Existing fibre from the fibre-to-the-node network, or 40% of the existing network, will also be reused. Another advantage is that power is not needed, providing flexibility on the location of the terminals. The tour reaffirmed our view that costs per premise will decline over the long term as scalability of the project increases once common infrastructure is completed. A fibre network also benefits from lower maintenance costs as the number of lines between the exchange and a cabinet is reduced. Chorus earlier noted fibre fault rates for the overall network, particularly at the distribution cabinets are half of that for a copper network.

[Jay]

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."