Author Topic: CTL - CenturyLink  (Read 71946 times)

petec

  • Hero Member
  • *****
  • Posts: 1547
Re: CTL - CenturyLink
« Reply #240 on: November 08, 2018, 03:15:32 PM »
Operating Cash Flow was up 13 % from last quarter, FCF up 36 %.

What do you guys out there think about the figures and the conferencecall ?

Several headlines reporting that OCF was below the lowest est. There may be something non-comparable about that as it looked fine in absolute terms to me.

Havenít listened to the call. What did they say about why capex is down?

Revenues does worry me somewhat.


Valuehalla

  • Sr. Member
  • ****
  • Posts: 313
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #241 on: November 08, 2018, 03:25:23 PM »
They shall increase the dividend by 1 cent, that would be a positive sign.  :) There is enough room to do so.
« Last Edit: November 08, 2018, 11:31:29 PM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

petec

  • Hero Member
  • *****
  • Posts: 1547
Re: CTL - CenturyLink
« Reply #242 on: November 08, 2018, 03:43:59 PM »
Ugh. Iíd far rather they paid down debt. The dividend is already way too high, until they prove they can stabilise revenue.

SI

  • Full Member
  • ***
  • Posts: 134
Re: CTL - CenturyLink
« Reply #243 on: November 08, 2018, 10:12:37 PM »
They did say why the capex is down, they refuse to extend the copper plant.

Debt is also moving down rapidly - debt was $39bn when deal closed, net debt 35.4 now and they put a half billion in to basically fully fund the pension. Assuming Tuesdayís ebitda growth guide is intact for the next twelve months, 9.1bn maybe is 9.3bn. Remember sunit guided ebitda growth each year for the next 5 so that was clearly a plan.

Anyway, If they donít find any more reusable equipment as they did this year, have no more tax efficiencies and are done consolidating real estate, you are looking at 3.7x net debt to ebitda by this time next year. My guess is in the low 3s the mkt will start valuing the company more on fcf to the equity than free cash to the firm - maybe that takes 3-4 years but that is where the value will be created. That time frame to me rhymes with tmus bs cleanup post sprint, that should leave them ready and able to shore up the most critical part of its supply chain and bring a complete sales offering against t and vz by acquiring ctl.

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1629
  • Never interrupt compounding unnecessarily -Munger
Re: CTL - CenturyLink
« Reply #244 on: November 09, 2018, 05:03:03 AM »
They did say why the capex is down, they refuse to extend the copper plant.

Debt is also moving down rapidly - debt was $39bn when deal closed, net debt 35.4 now and they put a half billion in to basically fully fund the pension. Assuming Tuesdayís ebitda growth guide is intact for the next twelve months, 9.1bn maybe is 9.3bn. Remember sunit guided ebitda growth each year for the next 5 so that was clearly a plan.

Anyway, If they donít find any more reusable equipment as they did this year, have no more tax efficiencies and are done consolidating real estate, you are looking at 3.7x net debt to ebitda by this time next year. My guess is in the low 3s the mkt will start valuing the company more on fcf to the equity than free cash to the firm - maybe that takes 3-4 years but that is where the value will be created. That time frame to me rhymes with tmus bs cleanup post sprint, that should leave them ready and able to shore up the most critical part of its supply chain and bring a complete sales offering against t and vz by acquiring ctl.
Completely aligned with your view. TMUS plus CTL will be super competitive with VZ and T. In Masayoshi Sonís hands this could be a global player like few others. Now I am getting ahead a bit.

Valuehalla

  • Sr. Member
  • ****
  • Posts: 313
  • Who wants to earn forever
Re: CTL - CenturyLink
« Reply #245 on: November 09, 2018, 05:42:54 AM »
CTL is extremly cheap now and a strong buy!

After the Q3 figures were published yesterday, I digged again in the old numbers of 2016, when the acquisition was announced and how the figures of CTL and LVLT standalone were at these times.

The progress and the development till today is great.

The fundamentals today are that CTL has just a marketcap of 22 B, but a FCF of 4,0 to 4,2 B, an EBITDA of 9 B, Net longterm debt of 35,749 B and a revenue of app 23 B in 2018

The 4 B FCF in 2018 is after tax, after capex, just before dividend. Dividend needs 2,3 B per year to pay it: So payout ratio app 56 %

With a 2,16 $ dividend p.a./ share, the dividend rate is now more than 10 %

A comfortable pillow to sit and wait. The management is committed to pay the dividend.

In 2016, when the acquisition was announced, it looked like this for the full year 2016:

Revenue:     LVLT  8,17 B         and       CTL 17,47 B          in total 25,642 B
EBITDA:       LVLT  2,865 B       and       CTL 7 B                 in total  9,865 B
FCF:             LVLT  1,1 B          and       CTL 1,817 B          in total 2,9 B
Net Debt:      LVLT 9,19 B         and        CTL 19,7 B           further app 10 B was added for the acquisition, so in total 40 B

From the beginning on, the new CEO Jeff Storey announced to increase FCF, margins and EBITDA. Always making clear, they will loose unprofitable revenue. Storey was CEO at LVLT before and did there the same agenda, which he is executing now in CTL: better FCF and margins on lower revenue.
« Last Edit: November 09, 2018, 06:13:46 AM by Valuehalla »
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1629
  • Never interrupt compounding unnecessarily -Munger
Re: CTL - CenturyLink
« Reply #246 on: November 09, 2018, 09:04:44 AM »
CTL is extremly cheap now and a strong buy!

After the Q3 figures were published yesterday, I digged again in the old numbers of 2016, when the acquisition was announced and how the figures of CTL and LVLT standalone were at these times.

The progress and the development till today is great.

The fundamentals today are that CTL has just a marketcap of 22 B, but a FCF of 4,0 to 4,2 B, an EBITDA of 9 B, Net longterm debt of 35,749 B and a revenue of app 23 B in 2018

The 4 B FCF in 2018 is after tax, after capex, just before dividend. Dividend needs 2,3 B per year to pay it: So payout ratio app 56 %

With a 2,16 $ dividend p.a./ share, the dividend rate is now more than 10 %

A comfortable pillow to sit and wait. The management is committed to pay the dividend.

In 2016, when the acquisition was announced, it looked like this for the full year 2016:

Revenue:     LVLT  8,17 B         and       CTL 17,47 B          in total 25,642 B
EBITDA:       LVLT  2,865 B       and       CTL 7 B                 in total  9,865 B
FCF:             LVLT  1,1 B          and       CTL 1,817 B          in total 2,9 B
Net Debt:      LVLT 9,19 B         and        CTL 19,7 B           further app 10 B was added for the acquisition, so in total 40 B

From the beginning on, the new CEO Jeff Storey announced to increase FCF, margins and EBITDA. Always making clear, they will loose unprofitable revenue. Storey was CEO at LVLT before and did there the same agenda, which he is executing now in CTL: better FCF and margins on lower revenue.

Munger has often said that there are customers who youíre better off not having. In the case of CTL itís entire biz segments that are worth jettisoning. The cost avoidance is huge which we heard one example of. Copper capital investment. Now the legacy CTL has loads of such shitty revenues. Why I posted earlier that total revenue growth is unrealistic for a while. They have to cut cost while growing profitable revenues. Wishing it different is futile.

petec

  • Hero Member
  • *****
  • Posts: 1547
Re: CTL - CenturyLink
« Reply #247 on: November 09, 2018, 09:28:06 AM »
CTL is extremly cheap now and a strong buy!

After the Q3 figures were published yesterday, I digged again in the old numbers of 2016, when the acquisition was announced and how the figures of CTL and LVLT standalone were at these times.

The progress and the development till today is great.

The fundamentals today are that CTL has just a marketcap of 22 B, but a FCF of 4,0 to 4,2 B, an EBITDA of 9 B, Net longterm debt of 35,749 B and a revenue of app 23 B in 2018

The 4 B FCF in 2018 is after tax, after capex, just before dividend. Dividend needs 2,3 B per year to pay it: So payout ratio app 56 %

With a 2,16 $ dividend p.a./ share, the dividend rate is now more than 10 %

A comfortable pillow to sit and wait. The management is committed to pay the dividend.

In 2016, when the acquisition was announced, it looked like this for the full year 2016:

Revenue:     LVLT  8,17 B         and       CTL 17,47 B          in total 25,642 B
EBITDA:       LVLT  2,865 B       and       CTL 7 B                 in total  9,865 B
FCF:             LVLT  1,1 B          and       CTL 1,817 B          in total 2,9 B
Net Debt:      LVLT 9,19 B         and        CTL 19,7 B           further app 10 B was added for the acquisition, so in total 40 B

From the beginning on, the new CEO Jeff Storey announced to increase FCF, margins and EBITDA. Always making clear, they will loose unprofitable revenue. Storey was CEO at LVLT before and did there the same agenda, which he is executing now in CTL: better FCF and margins on lower revenue.

Proforma predeal ebitda at $9.9bn suggests weíve lost several hundred million in ebitda despite huge synergies. That doesnít sound right?!


petec

  • Hero Member
  • *****
  • Posts: 1547
Re: CTL - CenturyLink
« Reply #248 on: November 09, 2018, 09:33:08 AM »

Munger has often said that there are customers who youíre better off not having. In the case of CTL itís entire biz segments that are worth jettisoning. The cost avoidance is huge which we heard one example of. Copper capital investment. Now the legacy CTL has loads of such shitty revenues. Why I posted earlier that total revenue growth is unrealistic for a while. They have to cut cost while growing profitable revenues. Wishing it different is futile.

Yes. I should have been explicit in our earlier debate that I was discussing growing ebitda-profitable revenue, not overall revenue. The problem is itís virtually impossible to know if thatís happening.

petec

  • Hero Member
  • *****
  • Posts: 1547
Re: CTL - CenturyLink
« Reply #249 on: November 09, 2018, 10:11:21 AM »
Just listening to the call. They are pretty explicit that the capex beat vs guide is not recurring. Guide for future years remains 16% of revenues. Plus thereís $300m of fcf one offs in 2018 (tax refunds etc). They made a comment that excluding one offs and at 16% capex, div/fcf would be in the low 70% range, implying sustainable run rate FCF is about $3.2bn.

On the positive side more of that FCF will go to debt reduction if they donít have to make more pension plan contributions.
« Last Edit: November 09, 2018, 11:03:08 AM by petec »