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CTL - CenturyLink


jm25

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  • 2 weeks later...
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CTL revised the timeframe to complete the acquisition:

There is a delay of 2 to 4 weeks.

So instead of closing it till end of Sept, they expect to close it till mid or end Oct.:

 

http://ir.centurylink.com/file/Index?KeyFile=390251009

 

Glen Post, CEO of CTL: "We view the slight delay in our projected closing date as manageable, and it does not affect our integration planning process. Both teams are ready to begin the integration process as soon as closing occurs."

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  • 3 weeks later...

California PUC:

 

All judges voted with YES, the proposed decision is signed, see Agenda ID 15977 :

 

https://ia.cpuc.ca.gov/agendadocs/3406_results.pdf

 

Final FCC decision expected till Monday; FCC approval clock restarted >> 3 days left:

 

http://www.lightreading.com/mergers-and-acquisitions/fcc-restarts-approval-clock-for-centurylink-and-level-3/d/d-id/737167

 

https://www.fcc.gov/transaction/centurylink-level3

 

According to the management, none of the circumstances are relevant for expected profit or FCF in the future.

 

 

 

 

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  • 2 weeks later...

On Friday 20th October I placed a Start-Buy-Order for 19,24 US$ to increase my CTL position.

In the later day the order was fullfilled.

 

There were strong activities concerning Call-options on Friday:

https://www.cnbc.com/video/2017/10/20/bulls-buy-into-centurylink-us-steel.html

 

I will place another Start-Buy-Order on monday with a limit of around 19,70 US$. (Closing Price Friday 19,04 US$)

 

 

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Next 9 trading days will be essential for CTL & LVLT.

 

- Till 31th Oct decision from FFC is needed, to give a green light to the acquisition of LVLT, otherwise contracts are overdue.

 

- Beginning of Nov CTL will present Q3 figures. Management has to prove, that their announcements from the past come true: in Q3 we await to see stable or slightly increasing revenue.

 

I will soon publish my expectations for the Q3 figures and further some updated basics (MarketCap & FCF) on the investment / aquisition.

 

I expect 1) a positiv decision from FCC and 2) very positive Q3 figures.

 

I am totally positive on the investment in CTL, described here in the corner since beginning of 2017.

 

My nearterm priceexpectations for CTL: 32 US$, now 19 $ = 70% upside potential + 11 % dividend

 

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Corvex (Keith Meister) increased its holdings of CTL shares on 20th October:

 

On 8thMay 2017: 29.998.645 shares = 5,5 %

http://ir.centurylink.com/Cache/2000479974.pdf?IID=4057179&FID=2000479974&O=3&OSID=9

 

On 16th June 2017 30.998.645 shares = 5,6 %

http://ir.centurylink.com/Cache/389128285.pdf?IID=4057179&FID=389128285&O=3&OSID=9

 

On 17th August 2017 36.548.645 shares =6,6 %

http://ir.centurylink.com/Cache/389963767.pdf

 

On 20th October 2017 36.849.476 shares = 6,7 %

http://ir.centurylink.com/Cache/390731590.pdf

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My expectations concerning the Q3 figures of CTL:

 

Operative revenue (just CTL)

Q2 2017: 4,05 B

Q3 2017: 4,40 B                        (Q3 2016: 4,382 B)

If the Operative revenue is above 4,1 B IMO they will have managed the U-turn / revenue is increasing.

 

Operative CF (just CTL)

Q2 2017: 1,442 B

Q3 2017: 1,610 B                      (Q3 2016: 1,590 B)

 

FCF just CTL (after tax, after CAPEX) but before dividend payout

Q2:  - 0,052 B

Q3:    0,770 B                          (Q3 2016: 0,186 B)

 

For full year 2017 the management expected a FCF of 1,55 to 1,75 B (for CTL without LVLT)

The (theoretical) marketcap is 9,078 B (just for CTL; without LVLT) at a closing price of 16,67 US$ on 6th Nov 2017

 

For the new formed combined entity CTL&LVLT my full year expectations for 2017:

The marketcap is 17,8 B at a closing price of 16,67 US$ on 6th Nov 2017

FCF  CLT 1,55 to 1,75 B

FCF  LVLT 1,10 to 1,16 B

FCF TOTAL 2,65 to 2,91 B

 

Because of NOLs and Synergies we can add a minimum of app 10 % in 2018 which results in a range of:

FCF TOTAL 2,915 to 3,201 B for 2018

(There was a statement from the management, that the NOLs will reduce taxes 0,650 B  per year, lasting for 4 years!)

 

To pay the dividend of 2,16 US$per share they need 2,288 B per year. = Payoutratio is app 75 %

 

 

 

 

 

 

 

 

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LVLT good Q3 figures:

Revenue slightly increased +1,2 % YoY,  2,059 B in Q3

EBITDA improved + 5 % YoY                    752 M in Q3

FCF strong improvment + 21 % YoY          369 B in Q3

FCF range confirmed for 2017                  1,1 to 1,16 B in 2017

 

LVLT seems to have the right approach to the market, good that Jeff Story will be the CEO in the future.

End of Q3 LVLT alone had 2,252 B cash or cash equivalent on hands!

 

CTL Q3 figures are disapointing:

Revenue down - 8 % YoY,                      4,034 B in Q3  subscribers down - 3/ -5 % YoY

                                                                                  No U-turn, but revenue just slightly down from 2Q

EBITDA down -8 % YoY                          1,397 B in Q3  margin down as well

FCF down - 41 % YoY                              109 M in Q3

Expected FCF range for 2017 will be missed

End of Q3 CTL alone had 160 M cash or cash equivalent on hands

 

- From Q2 to Q3 2017 the total revenue (CTL&LVLT) is just slightly down. (app just -0,2%)

- So it shall not be that hard to see an improvement in revenue.

- The low CTL FCF is a big disappointment for me. So its now up to synergies & CAPEX and the NOLs.

- While LVLT is just providing 33 % of the revenue, it generated 77 % of the FCF in Q3.

- The management clearly confirmed that they are able and willing to pay the dividend.

 

 

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Guest longinvestor

Thanks for posting! I've read other articles going back to the formative days of Kiewit, but most of those were historical and "how people lost money" type. This one includes fantastic lessons learned. I will have to read a few times to fully digest this.

 

Thanks again.

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Guest longinvestor

Thanks for posting. Agree with the author of this, this is a bet that is entirely based on Storey repeating his success at LVLT. Only that CTL is a big mess to fix. I do like Storey myself. The situation is tailor made for him. The expectations are so low right now and the noise is around the ability to pay the dividend or not. Storey will be allowed to low ball projections thanks to how beat up CTL is right now. He is really good at sandbagging. The enterprise business opportunity is huge (&profitable) and as the article mentions it, the market is focused on the consumer business woes at CTL. Like Frontier. Legacy LVLT has continually grown enterprise biz while Verizon has continually shrunk. 

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