Author Topic: CHTR - Charter Communications  (Read 127855 times)

vince

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Re: CHTR - Charter Communications
« Reply #210 on: April 15, 2018, 03:23:12 PM »
Not seeing sec filing with Advance Newhouse leads me to believe AN is not selling anymore shares back to Chtr


Spekulatius

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Re: CHTR - Charter Communications
« Reply #211 on: April 15, 2018, 03:49:23 PM »
Chtr being offered at very good prices on CURRENT ebitda where current ebitda is not representative of potential future ebitda.  Said another way, current multiple is basically a good cash on cash return with no growth.  That is a very nice margin of safety IMO.  Wish they had more capacity to take out more equity at these prices

What makes you believe that CHTR current EBITDA is not representative of future EBITDA? I expect to see mid single digit EBITDA, Sam than with CMCSA, which trades at lower multiples. I prefer CMCSA because of lower leverage and lower valuation at this point.
« Last Edit: April 15, 2018, 06:46:50 PM by Spekulatius »
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Liberty

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Re: CHTR - Charter Communications
« Reply #212 on: April 15, 2018, 06:35:05 PM »
Chtr being offered at very good prices on CURRENT ebitda where current ebitda is not representative of potential future ebitda.  Said another way, current multiple is basically a good cash on cash return with no growth.  That is a very nice margin of safety IMO.  Wish they had more capacity to take out more equity at these prices

What makes you believe that CHTR current EBITDA is not representative to future EBITDA? I expect to see mid single digit EBITDA, Sam than with CMCSA, which trades at lower multiples. I prefer CMCSA because of lower leverage and lower valuation at this point.

Because they are going through a huge integration/transition process that is depressing margins and likely growth.
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vince

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Re: CHTR - Charter Communications
« Reply #213 on: April 15, 2018, 06:56:11 PM »
 Ebitda growth rate with legacy charter footprint was high single to low double digits once the upgrades to the plant were largely complete and the product and pricing strategy was implemented.  I think it's also important to consider the fact that business was performing very much in line with what management was predicting.  Mr Rutledge was confident that once the plant was upgraded consumers would see that the cable product is superior to satellite and chtr would begin to claw back video customers.  Without the drag from video losses and conservative estimates of further broadband penetration you could see very good growth. Mgmt is now predicting, with this latest integration, even better relative performance all factors considered.  And they are backing up that conviction buying back large chuncks of equity at 350 a share.  As the integration recently passed the halfway mark, the biggest risks are behind them and value is increasing as the stock heads south.  Remember, 3 different companies were looking to acquire them and it was publicly stated that there was an offer for 540.  Of course the market overreacts to some lumpiness in their results, which by the way mgmt stated was obviously going to happen due to the sheer scale and complexity of the acquisition.  Lets assume though that you are right and they get mid single digit ebitda growth (which is what I use anyway for valuation), the returns will be fantastic.  And that was my original point.  But I also think one could pencil in 10 percent (or more) growth for the next few years (what I meant when I said not representative of potential future ebitda) which obviously greatly enhances returns.  The cfo was asked at recent conference whether he still felt low double digit growth was in the cards.  He said absolutely and that he is more confident now than ever.

vince

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Re: CHTR - Charter Communications
« Reply #214 on: April 15, 2018, 07:02:26 PM »
Thanks Liberty for saying basically what I said with my long post which for some reason I think was a waste of time in terms of getting anywhere with the extra effort.

dutchman

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Re: CHTR - Charter Communications
« Reply #215 on: April 16, 2018, 07:04:24 AM »
Can someone direct me to some material which explains why 5g and cord cutting isn't a threat to charter. The market seems to be freaking out of over this, and therein lies the opportunity i guess.  I get that they'll just keep raising the price of broadband if ppl cord cut, and 5g requires many more cells where cable can maybe play a role. Trying to understand the conviction that many of you, whom I respect, have.

Liberty

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Re: CHTR - Charter Communications
« Reply #216 on: April 16, 2018, 07:16:37 AM »
Can someone direct me to some material which explains why 5g and cord cutting isn't a threat to charter. The market seems to be freaking out of over this, and therein lies the opportunity i guess.  I get that they'll just keep raising the price of broadband if ppl cord cut, and 5g requires many more cells where cable can maybe play a role. Trying to understand the conviction that many of you, whom I respect, have.

Rutledge touches on this in his March 5 presentation. I suggest you check out his comments.
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Gamecock-YT

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Re: CHTR - Charter Communications
« Reply #217 on: April 16, 2018, 03:30:05 PM »
Not seeing sec filing with Advance Newhouse leads me to believe AN is not selling anymore shares back to Chtr
a day early

https://www.sec.gov/Archives/edgar/data/914545/000089924318010177/xslF345X03/doc4.xml

LongTermView

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Re: CHTR - Charter Communications
« Reply #218 on: April 18, 2018, 07:38:45 PM »
Charter breaks down capex on page 48 of the 2017 10-K:
Quote
in millions:
$3,385 Customer premise equipment [CPE] (a)
$2,007 Scalable infrastructure (b)
$1,176 Line extensions (c)
   $572 Upgrade/rebuild (d)
$1,541 Support capital (e)
--------
$8,681 Total capital expenditures

(a) Customer premise equipment includes costs incurred at the customer residence to secure new customers and revenue generating units. It also includes customer installation costs and customer premise equipment (e.g., set-top boxes and cable modems).
(b) Scalable infrastructure includes costs not related to customer premise equipment, to secure growth of new customers and revenue generating units, or provide service enhancements (e.g., headend equipment).
(c) Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
(d) Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
(e) Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles).

We know 2017 and 2018 are heavy in terms of growth capex due to the all-digital initiative. What is the breakdown between maintenance capex and growth capex for the above?

A similar question was answered in October 2014 but I'd like to continue exploring the blurry areas:
What is your best guess on maintenance capex. 1.5 billion$? 700m$ interest? that is 5-2.2 = 2.8bn$. But I assume some taxes? another 800m$ in taxes, so about 2bn$ in FCF. then a 12x multiple on 92m shares is 260$ of value. Possibly 280-290$ with that greatland stake?

what is an appropriate cash flow multiple on these things. Since they do have a nice moat, and possibly some growth? So if you say a 15x multiple, then it gets interesting.

Look over the conference call transcripts.  Management provides some information on free cash flow, and how much of that is customer premise equipment (CPE).

Whenever Charter signs up a new customer, it needs to send out a set-top box that it will rent to that customer.  The CPE is growth capex.
Some of Charter's capex may get a little blurry.  If it improves its Internet infrastructure, some of that is maintenance and some of that would be growth.  It's hard to say what the right split is.  But in any case, Charter management doesn't break that out.

Astrea

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Re: CHTR - Charter Communications
« Reply #219 on: April 19, 2018, 02:06:03 AM »
Just to get back to Dutchman re cord cutting/5G risks. These are my high level thoughts:

The disruption caused to the cable video distribution model is real but cable operators still own the infrastructure (i.e. the pipe to the home) over which both traditional and over-the-top video services are delivered to customers. In other words, cable owns the toll road and gets to set the toll charge and so there should be other ways it can make up for what it loses in video. Bundle economics should also continue to make sense and offer value to customers and I think that with the proliferation of OTT services in addition to linear TV, cable can continue to be an aggregator of content and offer value to the customer through bundling even if what's in the bundle changes.

No one has all the answers re 5G but as the technology sorts out, cable seems to lend itself to answering the questions better than others. Cable’s existing architecture comprises many of the building-blocks needed to compete in a 5G world, including an existing fibre network for backhaul and high capacity wireless connectivity in homes and businesses (i.e. wifi). By contrast, wireless carriers will almost certainly need to build dense physical networks (fibre and small cell radios) down from the macro-cell towers into the neighbourhoods with all the cost, time and overbuild risk that carries. On that basis, 5G may well be more of an opportunity for cable than a threat. At least that's what Charter is saying. VZ is saying that existing cable assets aren't quite good enough for a 5G world and so they are building their own networks in selected markets. How much of that is tactical ahead of some form of convergence with cable, I don't know.

It's worth following what's happening in Europe with the JV between Vodafone and Liberty Global. If that works out, then it further validates the merits of convergence between wireless and wireline operators. That JV valued Liberty Global's cable assets at around 11x EBITDA if I recall correctly.