Quote Originally Posted by Snoopy View Post
OK I am first to admit that this is not an 'apples with apples' comparison. Both companies are operating in the telecommunications space in New Zealand, but that is where the similarities end. Spark is primarily a 'retailer' that also happens to own their own 'mobile network' and is on the drive to become a wider player in the digital space. Chorus OTOH is strictly a fibre broadband network company that operates entirely in the wholesale space.

Nevertheless both are competitors in the sense that they compete for my investment dollar. So how do the investment fundamentals stack up when the key metrics are tabulated side by side?

FY2021 Spark Chorus
No. Shares 1,867m 447.025m
Share Price (10-10-2021) $4.83 $6.85
Normalised (eps) 20.1c 11.5c
Normalised PE 24.0 59.6
Normalised NPAT Margin 10.5% 5.4%
Normalised ROE 25.0% 5.4%
Net Bank Debt $1,403m - $72m $2,373m - $53m (1)
Declared NPAT $384m $47m
Min. Debt Repayment Time 3.5 years 49 years
Snoopy's Fair Share Price Valuation (2) $5.58 $8.36
Market Discount to Fair Value -13% -18%

Notes

1/ Bank debt for Chorus excludes crown funding
2/ For this comparison my 'Fair Share Price Valuation' is based on my 'capitalised dividend valuation' model (Post 2658 on Chorus Thread, Post 1820 on Spark Thread). Being a monopoly wholesale provider, I have judged a fair yield in today's ultra low interest rate market for Chorus shares to be 5%. For Spark being in a different competitive market place (albeit starting from a strong incumbent position) I have judged a fair yield for Spark shares to be 6%.

Lined up so starkly like that, when I was looking recently for a space for my 'telecommunicatioons dollar ' to go, I think you can see why I pushed it the way of Spark. It came down to a better earnings ability (higher ROE) and much more conservative debt position (the MDRT figure for Chorus of 49 is eye watering). I actually hold both shares. But my 'commitment' to each, in dollar terms, is now 4:1 in favour of Spark.

My fair value calculations, both yield based, both have a whisker of unease attached to them. Actual dividends paid out from Spark have been above core earnings in recent years. So being able to keep paying those dividends in the future will require some of those Spark 'business development plans' to come to fruition. LIkewise Chorus is transitioning to a new 'cashflow based' dividend policy. I was already projecting sharply lower imputation credits going forwards, a reality which has since been confirmed by Chorus. But it does seem the Chorus capital spend is tracking higher than expected and they are facing more competition from 'disruptive technology' in the form of 'fixed mobile broadband' from Spark, Vodaphone and 2 degrees. So I may have to rethink that 'acceptable monopoly yield' that I have attributed to Chorus

SNOOPY
Given the first nine lines of your comparison table (favour SPK), its hard to see how you arrived at the comparative figures in the last two lines, Snoopy.