SPK

Spark is the big Telecom NZ business (broadband, mobile, data, networks etc). We’ve owned it before in our direct equity portfolios.

The company had a good result. The new news regarding the proposed sale of the passive mobile tower infrastructure is positive, we think, given infrastructure valuations, and follows the same path as TLS and TPG.

The company also reported the highest ever employee engagement result, which is precisely the sort of thing that doesn’t matter until it does.

In a similar manner to TPG, the eventual resumption of tourism should also be a positive revenue catalyst, making SPK something of a weak reopening play.

Revenue growth is finally coming through, up c5.2% h/h…

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…accompanied by solid free cash flow generation.

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The balance sheet is robust, arguably under-geared for a teleco…

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…that has fairly stable margins…

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…earnings…

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…and cashflows.

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It stands out as reasonable value on a simple regression framework, as it does on simple relative value measures.

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Mind you, anything looks inexpensive when you’ve got UWL sitting at the other end of a narrow space.

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It isn’t cheap in an absolute sense, but it is a Quality business, with good growth prospects, in a market where most Quality looks overvalued, and most Growth looks very overvalued. In a choppy market, it’s not a bad port for a storm.

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