LILA - Liberty Global Latin America tracker

[Liberty]

So far we've been discussing LiLAC in the Liberty Global thread, but it's probably a good idea to break it off in its own thread going forward so it's easier to find what has been posted about each company

Here's the LBTYA thread for reference:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/lbtya-liberty-global/

[eclecticvalue]

I am intrigued by this. Since Latin America is an emerging economy and building an empire in the promising countries would be really good.

[ItsAValueTrap]

Has anybody looked at insider compensation?  I remember with LVNTA/LINTA, Malone was to receive Ventures options while everybody else received LINTA options.  So he seemed to favour LVNTA over LINTA.

[meiroy]

How would sovereign defaults in latin america impact this investment? Can J.M. handle it as well?

[folivera13]

http://www.benzinga.com/analyst-ratings/analyst-color/15/08/5727430/is-the-liberty-lilac-spin-off-worth-investing-in

"According to the Morgan Stanley report, “Management has stated that there is a long list of potential M&A candidates with a combined EBITDA opportunity of more than five times LiLAC's current size.

Equal-Weight For Now

However, the analyst believes that this positive outlook is already priced into the stock. While Liberty Global is a compelling long-term growth story, local organic FX growth is expected to slow down sharply in 2015-2016 to the mid-single digits, due to tougher competition in Chile, more difficult comps and the weaker Puerto Rico macro environment."

[Liberty]

Q2 looking good at first glance:

http://www.libertyglobal.com/pdf/press-release/Liberty-Global-Earnings-Release-Q2-15-FINAL.pdf

[Fat Pitch]

• Added 43,000 organic RGUs and increased customer relationships by 14,000 in Q2
• Delivered Q2 rebased revenue growth of 7%, our best quarterly result in two years
• Rebased OCF up 13% to $128 million in Q2, resulting in margin expansion of 240 bps to 41%
• Chile and Puerto Rico with Q2 rebased OCF growth of 14% and 12%, respectively

That operating leverage is kicking in.

[muscleman]

How is debt handled for tracking stocks? Are they borrowed and guaranteed under the Liberty Global parent as EURO currencies?
I am trying to figure out how the debt issue will be impacted by hyper inflation. Usually if they borrow the local currency and there is hyper inflation and they are able to pass the costs to clients, the real debt is actually decreasing quickly.

[meiroy]

How is debt handled for tracking stocks? Are they borrowed and guaranteed under the Liberty Global parent as EURO currencies?
I am trying to figure out how the debt issue will be impacted by hyper inflation. Usually if they borrow the local currency and there is hyper inflation and they are able to pass the costs to clients, the real debt is actually decreasing quickly.

Hyper inflation will be followed by contagion and sovereign defaults. We have been to this movie before. Doesn't this bother you more?

[no_free_lunch]

Here is my chicken scratch after going through the 10q.

I have 12.5M lila class A, 0.5M class B and 30M class C shares.   I have no idea what the share price of C shares is, the A is $42 and the B is $43  so roughly $1.8B mcap right there which is much higher than yahoo finance.  Still it's a new stock with a complicated structure so can anyone confirm the market cap?
 
Adjusted OIBDA % is around 41% while closer to 50% in Europe.  Not sure if that same ratio is possible here but given that it was at 39% last year likely they are not done yet.  OIBDA was $125m and $238m for last quarter and last 6 months.

I have $145M in debt payments, $220M in capex & $35m for derivatives in 2016.  So if OIBDA comes in at $500m, that is about $100m in FCF?  Maybe I am missing something else..

The 7.5% growth rate is organic (which is good) but net growth was only around 2%.  Not an issue by any means as margins are improving but just for clarity.

They attribute only $1.3M of share compensation expense to LILAC, $55M to global.  I think the rest of management expense would show under SG&A.

Regarding the debt they hold the Chilean debt local I think but have an currency thing (collar?) to compensate them if currency moves against them.   Chile is a pretty stable country too, I don't see hyper inflation as a risk.  Puerto Rico uses USD from my understanding, the debt is in USD there.

There is more but I don't feel like typing.  Honestly it looks attractive to me right now but then I am fairly easily sold when Malone is involved.   I will need to think about it for a week or so.   Interested to see other's opinions.  In particular I wonder what other's think of the valuation. 

Does anyone know Malone's stake in the company?