Author Topic: LILA - Liberty Global Latin America tracker  (Read 98839 times)

spark411

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Re: LILA - Liberty Global Latin America tracker
« Reply #270 on: February 13, 2018, 05:30:01 AM »
I look at this as a positive.  The thesis for me is that Malone has a proven playbook to execute in Lilak.    A big part of the playbook are acquisitions.     Lilak should be able to buy poorly run assets and turn it around quickly with lower costs (debt, programming, and capex) and better processes.  The fact that they already bought an asset shows me that they are getting reception in the Latin American marketplace.

The multiple on a poorly run asset is not significant as what they think they can get after the acquisition.   Lilak could be aggressive on their assumptions but as long as they are getting about 8x, I think it's fine.  Big picture I think we want Lilak to generate free cash flow and redeploy that capital and generate more cash flow.


maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #271 on: February 13, 2018, 09:29:47 AM »
I look at this as a positive.  The thesis for me is that Malone has a proven playbook to execute in Lilak.    A big part of the playbook are acquisitions.     Lilak should be able to buy poorly run assets and turn it around quickly with lower costs (debt, programming, and capex) and better processes.  The fact that they already bought an asset shows me that they are getting reception in the Latin American marketplace.

The multiple on a poorly run asset is not significant as what they think they can get after the acquisition.   Lilak could be aggressive on their assumptions but as long as they are getting about 8x, I think it's fine.  Big picture I think we want Lilak to generate free cash flow and redeploy that capital and generate more cash flow.

The synergies are huge in telecom acquisitions, so it makes sense to focus on the post-synergies number. This is how the M&A game works in this sector, the acquirer and the acquiree effectively share the snyergies.

HalfMeasure

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Re: LILA - Liberty Global Latin America tracker
« Reply #272 on: February 13, 2018, 09:35:53 AM »
I look at this as a positive.  The thesis for me is that Malone has a proven playbook to execute in Lilak.    A big part of the playbook are acquisitions.     Lilak should be able to buy poorly run assets and turn it around quickly with lower costs (debt, programming, and capex) and better processes.  The fact that they already bought an asset shows me that they are getting reception in the Latin American marketplace.

The multiple on a poorly run asset is not significant as what they think they can get after the acquisition.   Lilak could be aggressive on their assumptions but as long as they are getting about 8x, I think it's fine.  Big picture I think we want Lilak to generate free cash flow and redeploy that capital and generate more cash flow.

The synergies are huge in telecom acquisitions, so it makes sense to focus on the post-synergies number. This is how the M&A game works in this sector, the acquirer and the acquiree effectively share the snyergies.

Further, this is a consolidation vehicle. If you're not comfortable with the acquisition strategy, it's impossible to wrap your head around the stock. Part of any thesis requires comfort with management's ability to execute.

WayWardCloud

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Re: LILA - Liberty Global Latin America tracker
« Reply #273 on: February 13, 2018, 01:00:14 PM »
The good:
- They're paying in cash + debt. A stock purchase would have been a disaster at the price LILA is currently being valued by the market.
- The founding family keeps a meaningful interest in the cables (20%) and full ownership of the content creation arm of their company. They've signed an exclusivity contract with LILA to keep distributing their channels. It sounds to me that interests are well aligned and that LILA Costa Rica will enjoy the benefits of controlling some of its content without bearing the risks of actually owning the production company.
- Costa Rica seems well run (and beautiful!).

The bad:
- I agree that to read only of the multiple post synergy is scary (although it's really low so we might just be actually getting an awesome deal, who knows). The other obscure footnote to me is the IFSR/GAAP discrepancy. I know it's normal since a Latin American asset gets bought by a US company but I wish they'd do the math BEFORE the transaction closes because that was one of the problems with CWC/Columbus.
- I agree that LILA is mostly a bet on management and that one has to be comfortable with believing in their best intention and that they still have the magic touch. I happen to be a believer but it's not a huge position for me either because there are many risks here.

Footnote nb3: Such financial information is in accordance with International Financial Reporting Standards (“IFRS”), as adjusted to include the capitalization of customer installation costs, which are expensed in accordance with Televisora’s IFRS accounting policies and will be capitalized in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Liberty Latin America has not completed its analysis of the differences between Liberty Latin America’s U.S. GAAP accounting policies and Televisora’s IFRS accounting policies with respect to Cabletica’s financial information.
« Last Edit: February 13, 2018, 01:41:49 PM by WayWardCloud »

Gordon Gecko

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Re: LILA - Liberty Global Latin America tracker
« Reply #274 on: February 15, 2018, 12:36:11 PM »
Any thoughts on earnings/call today?

Guidance seemed light, but PR sounded way ahead of most people's expectations.

Thoughts on PP&E adds as a % of sales? Seemed low given the reconstruction efforts. Maybe indicative of further deal flow? Or conversely, elevated competition and tight capital?

spark411

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Re: LILA - Liberty Global Latin America tracker
« Reply #275 on: February 16, 2018, 03:13:49 AM »
I thought the overall conference call was solid.   Here are some positives and negatives I got out of the call.

Positive:
1.  Mgmt did a good job of allaying fears about Puerto Rico and other Hurricane impacted regions.  They mentioned that households will be reduced in Puerto Rico b/c of Hurricane and that they lost some customers BUT they also said that power is restored to many and Lilak is now producing positive OCF.  They also looked at the rebuilding as an oppty to gain market share and thus hope to at minimum be back to where they were before the Hurricane.  I think a lot of institutional money is holding back because of the impact of hurricanes.  I hope the call alleviated their concerns and they are open to buying Lilak again.
2.   M&A pipeline is solide.  Discussed how they can do acquisitions creatively.  For example, the recent deal is Costa Rica was a small equity check because they convinced the bank to finance most of the deal.     This was a BIG positive for me.   Positive b/c they have the expertise to structure deals that's win/win for them and the seller and do it with relatively little cash.    Also, just like a seller will be excited I think local banks/credit market will be excited to work with Lilak.
3.  The $1.4B OCF guidance does not include the potential $100M refund from the insurance claim.   This is upside.
4.  2018 OCF is weighed down b/c of hurricane impact.   I think the result is that 2019 will be an abnormally high growth rate.
5.  They will not use stock as a currency for M&A at this time.  They may use stock in the future.   My takeaway is that the stock price is too low right now.

Negative:
1.  They did not buy back shares in Q4.  They did not hint that they will buy back shares.   I thought this was kind of disappointing.   I got the sense that they prefer using cash flow to do acquisition than buy back shares.

Neutral:
The capex spending is 21% and that number is inclusive of the capex for the hurricane.  I don't know if this is a positive or negative. 

These are my takeaways.   I have a big position and thus I am biased.  Please take my comments with a grain of salt.

Gordon Gecko

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Re: LILA - Liberty Global Latin America tracker
« Reply #276 on: February 16, 2018, 08:45:43 AM »
@spark411 What do you make of guidance?

$1.4 isn't split out, so it's tough to back into anything. Seemed light given the price increases in JAM and T&T though, no? They're implementing a low-mid single digit across some of their larger territories and looking to exit the year w/ ~$170mm run rate OIBDA for PR.  $1.4 probably gets you to around 7.5x proportional OIBDA including fully synergized Teletica (netting minority payments)?

I think that's probably an OK multiple on what would (likely? Hopefully?) be a closer-to-trough earnings period in CWC. I don't think I could supersize a position here though. Any addtl thoughts?

spark411

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Re: LILA - Liberty Global Latin America tracker
« Reply #277 on: February 16, 2018, 06:53:09 PM »
My thoughts on OCF are:

A.  We have a new company with a first time CEO.  The last thing they want to do is miss the 1st guidance they offer.   Guidance is "Greater than" $1.4B.   I think the guidance is conservative and they are giving a hint.

B.  As mentioned in the last post, there is an extra $100M cash from the insurance claims not in the guidance.

C.  I think the wild card is the hurricane affected regions.   How fast they ramp up OCF from those regions is out of Lilak's control i.e. power to the affected areas.  Because of this, I think they could not offer a solid guidance.

All in all, I think there is upside to the guidance and I hope they raise guidance throughout the year.   

flesh

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Re: LILA - Liberty Global Latin America tracker
« Reply #278 on: February 17, 2018, 09:44:46 AM »
2019 Will be a great year.

maybe4less

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Re: LILA - Liberty Global Latin America tracker
« Reply #279 on: February 17, 2018, 10:45:18 AM »
My thoughts on OCF are:

A.  We have a new company with a first time CEO.  The last thing they want to do is miss the 1st guidance they offer.   Guidance is "Greater than" $1.4B.   I think the guidance is conservative and they are giving a hint.

I think this is right. Comments from Fries over the last year or so have led me to believe they have made a conscious decision to be much more conservative on guidance.