Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: WayWardCloud on June 05, 2019, 10:23:44 PM

Title: TIGO - Millicom
Post by: WayWardCloud on June 05, 2019, 10:23:44 PM
Millicom is a cable and mobile provider in several Latin American countries (Bolivia, Honduras, Nicaragua, Guatemala, Paraguay, El Salvador, Panama, Colombia, and Costa Rica) as well as a few legacy African markets which are being slowly divested.

It is run by former Liberty Global Exec Mauricio Ramos. In fact, Liberty Latin America offered to acquire Millicom in January for a rumored price of $72/share, which CEO Ramos declined.

Stock Price: $53.12
Market Cap: 5.4B

VIC write-up:

NASDAQ introduction call:

The largest shareholder is a Swedish group of investors named Kinnevic AB. They own about 37% of the shares and announced on Monday their plan sell about 11% of them through a public offering and distribute the 26% left to their members directly so that they can choose to hold or sell their own shares. Apparently, they have big projects to invest in other ventures in Sweden such as e-commerce so I’d expect the holders to sell as well. The announcement sent the shares down 10% although they have recovered a little bit since.

Disclosure: I opened a 5-6% long position on Monday at market open.
Here is what I see:

- Cheap price
- Hard-working, honest and charismatic young leader
- Good operational numbers
- Well into their transition to cable + 4G
- Proven ability to build >1 million new connections a year for dirt cheap
- Recent sell off based on technical downward pressure rather than fundamentals (the missed Liberty tie-up + Kinnevic pulling out)
- Liberty probably provides a floor around $72

Title: Re: TIGO - Millicom
Post by: Value92 on June 11, 2019, 09:51:09 PM
Great catch! I just started doing research on the entire global cable space (US, Europe and LatAm)

It looks cheap looking at the numbers. In contrast to the foreign Malone assets management delivers operationally.

I still have a few open questions:

Have you ever met Mauricio? If so, what is your impression of him? Do you think capital allocation will shift towards the levered equity model of Malone after Kinnevik is out?

Why are they building HFC and not pure fiber connections? The costs should be the same and fiber is more future proofed. In what kind of way does the network differ from the US and Europe? I know for example that in Europe you have splintered networks which is different from the US.

I know that Liberty Global in Europe failed as there is still a lot of friction in terms of regulation between the different countries. Is Latin America different? Allowing just 2 players to survive in each market is definitely different from Europe.

Title: Re: TIGO - Millicom
Post by: DeepValuePlay on June 12, 2019, 03:23:55 AM
Volume is not very large relative to market cap.
My guess is that if 26% is now in the hands of motivated sellers we could see significant forced selling that could bring the share price way down. The next few months may present an extremely attractive entry point...
Title: Re: TIGO - Millicom
Post by: WayWardCloud on June 12, 2019, 07:07:23 PM
The Kinnevik clowns people just withdrew their offer to withdraw...  ???

Up 10% after hours
Title: Re: TIGO - Millicom
Post by: bizaro86 on June 12, 2019, 07:39:14 PM
The Kinnevik clowns people just withdrew their offer to withdraw...  ???

Up 10% after hours

Interesting reaction. I'm not sure +10% makes sense. I don't think that 'sale withdrawn due to poor market conditions' is the same as 'we are satisfied permanent capital.' Seems like any sustained share price increase will probably get the offering re-launched? Makes the overhang not immediate, but still seems pretty real to me.
Title: Re: TIGO - Millicom
Post by: WayWardCloud on June 12, 2019, 08:11:34 PM
Definitely. I just think it has no impact on the intrinsic value of the company so since I'm not a trader at all I let other people worry about those things and I'll be happy to buy more if it drops again due to no fundamental reason.
Title: Re: TIGO - Millicom
Post by: mwtorock on June 13, 2019, 06:56:49 AM
indeed a very interesting idea. thanks.
Title: Re: TIGO - Millicom
Post by: WayWardCloud on June 14, 2019, 03:25:19 PM
The CEO just bought another $2.43M worth of shares, bringing his total stake in the company to around $8.55M
Title: Re: TIGO - Millicom
Post by: WayWardCloud on September 17, 2019, 06:21:00 PM
Millicom is down a little over 5% today on accounts that their main shareholder, Kinnevik AB, announced they will distribute all the TIGO shares to their clients. Kinnevik also intends to cancel their dividend (which came out mostly of their Millicom investment) in order to focus on doing tech startups PE investments instead.

This will probably create a technical downward pressure on the stock for the next few months/quarters as some of those clients will want to unload their shares in the market. I wonder if Millicom will decide to scratch their dividend program as well and replace it with share buybacks now that they're free to do so, which could trigger even more selling, or if they'll maintain it in order to keep some of the dividend hungry shareholder base.