SPK- Spark NZ (TELCO)

[Rawz]

The last forbar report i read had SPK rated underperform with a price target of $2.80.
EPS and DPS forecast to fall/flat from FY25 through to FY27.

FY27 div yield est at 8.60%
Todays div yield of 12.92% (as per Jarden website) is a dividend trap.

I agree the MSCI event must already be priced in. The fall in SP is related to the gurus predicting a decline in the business.

The only thing that will get the SP out of this vicious downtrend is either;

1) the company surprises on the upside and beats what the market is forecasting as a decline in future earnings
2) the company hits absolute rock bottom, which nobody knows where that is.

So buying now is just hoping for SPK to beat what the market is forecasting eps to be OR you are playing that tricky game of trying to catch a falling knife. I say why bother....

Anyways, up the wahs and go SPK!!

[Snoopy]

The last forbar report i read had SPK rated underperform with a price target of $2.80.
EPS and DPS forecast to fall/flat from FY25 through to FY27.

FY27 div yield est at 8.60%
Todays div yield of 12.92% (as per Jarden website) is a dividend trap.

Forecast dividend, following immediately before the AGM downgrade was is 25cps, 75% imputed.
Gross dividend is 0.75x (25cps/0.72) + 0.25 x25cps = 32.29cps

Gross price dividend yield on 08/11/2024 for the next twelve months = 32.29c/304c = 10.6%

That is a lot higher than the 8.6% gross dividend yield for the FY2027 you claim. Why do you think the best gross dividend yield in the NZX50 is a dividend trap?

The fall in SP is related to the gurus predicting a decline in the business.

The only thing that will get the SP out of this vicious downtrend is either;

1) the company surprises on the upside and beats what the market is forecasting as a decline in future earnings
2) the company hits absolute rock bottom, which nobody knows where that is.

So buying now is just hoping for SPK to beat what the market is forecasting eps to be OR you are playing that tricky game of trying to catch a falling knife. I say why bother....

Why is your 'guru analyst' forecasting a further 20% reduction, in dividend in excess of the latest now downgrade in the midst of a recession, in three years time?

SNOOPY

[Rawz]

Forecast dividend, following immediately before the AGM downgrade was is 25cps, 75% imputed.
Gross dividend is 0.75x (25cps/0.72) + 0.25 x25cps = 32.29cps

Gross price dividend yield on 08/11/2024 for the next twelve months = 32.29c/304c = 10.6%

That is a lot higher than the 8.6% gross dividend yield for the FY2027 you claim. Why do you think the best gross dividend yield in the NZX50 is a dividend trap?



Why is your 'guru analyst' forecasting a further 20% reduction, in dividend in excess of the latest now downgrade in the midst of a recession, in three years time?

SNOOPY

That 8.6% div yield for FY27 is based on the assumption that dividends are cut from 25cps to 20cps. And I note this is still ABOVE their forecast EPS of 18cps in FY27. So it is very possible the dividend is cut even more. Or more debt or more selling the family silver i guess.

I dont know why they are forecasting the decline. But what I do know is its what the market believes. Hence why the SP is down 40% YTD. If the so called guru's are thinking this way and the SP is down a lot following their thinking then why get in front of the freight train. You are just going to get mowed down

[nztx]

$5 a month extra here, $5 extra a month there ...

xtra email addresses, wifi etc, something else in December etc all tots up .. must be a captive audience out there & not a small one either, sucking up & shelling out on all these monthly charges increases to fill a gap

[winner69]

From a BusinessDesk piece on Infratil’s upcoming half year results and OneNZ expectations -

We see it as overall better placed than its peer, Spark NZ,” they said.

However, they said there is a risk some of Spark's headwinds – specifically with corporate mobile – have also impacted One NZ.

Ibbotson and Crozier estimate One NZ's 1H25 will be up 4% on 1H24 but down from its strong 2H24. They forecast $290 million.


Comment: Spark doing well

[Filthy]

Spark has entered into a reseller agreement with Starlink.... might help.

[Snoopy]

https://www.nzx.com/announcements/440861


Spark reduces FY25 guidance

• EBITDAI1 guidance2 updated from $1,165-$1,220 million to $1,120-$1,180 million
• Capex3 guidance updated from ~$460-$480 million to ~$415-$435 million
• Dividend guidance updated from 27.5 cents per share to 25 cents per share, 75% imputed
• Review of non-core assets underway, with decision made to divest Spark’s shareholding in Connexa
• SPK-26 Operate Programme expanded to deliver materially higher cost reductions over multi-year period

Infratil this morning released their results for the half year ended 30-09-2024 (HY2025 results). Of interest to Spark shareholders is the performance of their telecoms subsidiary 'One NZ'. The reporting period is 3 months out of phase with Spark, which has their financial year end on 30th June. But 'for the record':

For Spark: 2HYR2023 ended 30-06-2023, 'Revenue' was: ($4,491m - $584m) - ($2,534m - $584m) = $1,957m
(I have removed $584m of revenue from the Connexa tower sale from the FY2023 result).
For Spark: 2HYR2024 ended 30-06-2024, 'Revenue' was: $3,861m - $1,976m = $1,885m
This represents a revenue drop of 3.68% between the current half (2HY2024) and the prior comparative period.

For Spark: 2HYR2023 ended 30-06-2023, 'Mobile Revenue' was: $1,470m - $732m = $738m
For Spark: 2HYR2024 ended 30-06-2024, 'Mobile Revenue' was: $1,474m - $749m = $725m
This represents a revenue drop of 1.76% between the current half (2HY2024) and the prior comparative period.


For 'One NZ': 1HYR2024 ended 30-09-2023, 'Revenue' was: $963m
For 'One NZ': 1HYR2025 ended 30-09-2024, 'Revenue' was: $940m
This represents a revenue drop of 2.39% between the current half (HY2025) and the prior comparative period.

The figures between 'Spark' and 'One NZ' are not directly comparable, because of the different product mix of each company (as well as the timing of reporting issue I mentioned previously). Yet the point of this comparison is to show that rather than the latest profit downgrade at Spark being indicative of a 'Spark meltdown', a similar deterioration has been seen in the 'One NZ' revenue streams. IOW, what we are witnessing with Spark's profit downgrade is the effect of the wider deterioration of the economy on Spark, - not any company specific weakness in the Spark business model. If that is so, I would expect Spark earnings to recover as the economy recovers. Not descend into a spiral of ever decreasing earnings and dividends as some analysts seem to think.

SNOOPY

[X-men]

One wonders whether the economy will recover...maybe 10-20years???

It only took 6 years to destroy everything under the labour government. Some much money was printed n given away for free to those lazy people...

[ThaiJohn]

And it gets a Damehood for its effort.

[winner69]

Guy from Devon said on Infratil result that “One NZ performance was impressive – better than Spark’s.”

Just one guys view I suppose