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    Home Unlabelled Value Investing GS on oil, OPEC and Russia

    Value Investing GS on oil, OPEC and Russia

    May 29, 2018

    Value Investing GS on oil, OPEC and Russia

    GS on oil, OPEC and Russia

    Posted: 28 May 2018 11:43 PM PDT

    Mario Gabelli on Value Investing Today

    Posted: 29 May 2018 02:47 AM PDT

    Altice USA - long thesis with catalysts

    Posted: 29 May 2018 01:20 AM PDT

    Some of my initial thoughts on Altice USA – which is potentially a 'special situation' in the cable sector. The company is currently undergoing some structural changes as they are being spun off from their struggling European parent, Altice (referred below as Altice EU) went through a reckless buying spree over the last few years.

    I thought it could be interesting, as Altice USA is further along in the capex journey in terms of upgrading to digital, than Charter (being that they have a smaller footprint to upgrade) and they have suffered from being an arbitrage target over the last few months (IPO lockup period ended in Dec 2017, and a 27% short on the float due to spin dynamics).

    Altice USA:

    • Current price: $18.50; Market Cap: $13.6bn, Net Debt: $22bn (5.4x)
    • Fourth largest cable provider in the US – with 4.5m customers and passes through 8.6m homes
      • 45% of the $9.3bn in revenue is made up of TV and 55% broadband
        • Broadband is accelerating growth with 4Q17 rev up 13.1% driven by ARPU growing 10.6% y/y.
        • Similar to Charter, I expect EBITDA margins for broadband are approximately +60\% versus 40% for the whole business (company does not break this out) due to high programming costs/carriage fees (approx 70% of tv revenue)
    • Strong fundamentals with attractive valuation (8.0x 2018E EBITDA versus Charter at 9.4x)
    • Background: In 2015 Altice EU, a European telecom company, purchased US cable systems Suddenlink and Cablevision – (will do MR on what they paid for these businesses)
      • Altice EU IPO'd 10% of the Altice USA shares on the NYSE for $30 in June 2017, the shares currently trade around $18.50
      • Altice EU has decided to spinoff Altice USA on June 8th which will increase the float by 4x
    • Altice EU shareholders will receive 0.4163 of a US share for each share in the spinoff. As a part of the spin, Altice USA has committed to a $2bn repurchase over the next 3 years (15% of the MC)
    • Altice EU went on a massive M&A spree over the last few years, and now find themselves highly geared (6.5x) and with little to show for it – hence why they are slowly divesting assets
    • Due to the decision to spin, arbitragers have been heavily shorting Altice USA (currently short sales account for 27% of the float)
    • Further to the arbitrage dynamic, the lockup period for the IPO has also served as an overhang which expired in Dec 2017. The number locked up was more than 233m and only 51.7m were trading at the time
    • Tax loss carry-forwards will shield Altice USA's rising cash flow and the US business has committed to buying back stock with that cash
    • Recently added to the Goldman Sachs 'High Conviction' list with a target price of $28 (50\% upside) based on the expected rise in FCF/share from $2.20 to $3.09 per share (or 18% CAGR) in 2020 while keeping debt levels to 4.5x and continuous buybacks
      • Consensus Mean Target Price: $26.50 (43% upside); DB: $38 ; Citi: $30 ;
    • Risks: The debt is quite high at around 5.4x net debt/EBITDA, the upside is that Altice has lower capex spend, having already invested in digital set-top boxes – and therefore Net Debt/(EBITDA-capex) is 7.7x versus 10.7x for Charter (due to higher capex phase)
      • As at 2017 year-end 86% of homes within Altice USA's footprint have access to 400 Mbps or greater, up 23% a year ago, compare this broadband speed to Charter's where only 25% of the footprint have access to 200 Mbps – hence the lower capex going forward
      • Although Altice USA is highly levered, borrowing costs may decrease as the co. refinances/class 1/3rd of it's highest-cost notes in 2018/2019.
      • It is also worth noting that 85\% of the debt is fixed rate
    • Cable companies typically operate 'local monopolies', plus Altice has negligible overlap with Charter and Comcast. This means that post-spin (increased float) will make Altice a prime M&A target (esp if Trump softens regulation on the sector):

    https://i.redd.it/0sqg8g737r011.png

    Let me know your thoughts

    submitted by /u/yungyellen
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    Charlie Munger Interview May 2018

    Posted: 29 May 2018 04:22 AM PDT

    Sunesis Capital Short Thesis on Greenlight RE

    Posted: 29 May 2018 12:04 AM PDT

    Passive Investing Could Prove to be an Expensive Mistake

    Posted: 29 May 2018 02:51 AM PDT

    Carl Icahn on His Latest Investments

    Posted: 29 May 2018 02:50 AM PDT

    Can somebody explain how credit card lenders think about unpaid balances?

    Posted: 28 May 2018 07:26 PM PDT

    It seems to be a double edged sword. If many customers dont pay balances, and delay over several months, the lender (lets say Citi) can charge high interest fees and late fees.

    However, if the customer becomes delinquent and never pays the debt, then Citi will lose money on that customer.

    How do lenders think about the unpaid balances? How much do they want? and at what point does the unpaid balance become counter-productive?

    submitted by /u/ggg479
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    This is what long-term QE looks like...

    Posted: 28 May 2018 03:50 PM PDT

    It's an article on currency debasement in Ancient Rome

    Business Insider isn't a great source, but article interesting...

    http://uk.businessinsider.com/how-currency-debasement-contributed-to-fall-of-rome-2016-2

    submitted by /u/the-lifestyle
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