MHSDF - Megacable

[marazul]

Megacable is the second largest cable (HFC) company in mexico. They are valued at roughly 8.5x current EBITDA, with a market cap of ~$3.5bn and roughly 0 net debt (oddity for a cable company). They have been growing video subs at high single digits while bband subs have been growing at high teens. They should keep taking share from Telmex, since they are able to provide higher speeds vs DSL. Bband penetration rate is still very low at 28% of their homes passed, and passings are growing at ~5%. This growth, couple with other investments such as digitalization, has put capex/sales at high levels of high 20%s in recent years. ARPU is also quite low, for example bband ARPU is 180 pesos (~$10) and video ARPU 210 pesos (~$11.50). So there are many levers to keep growing. Company is controlled by the Bours family.

 

If someone knows the company and wants to discuss, happy to.

[cameronfen]

I was discussing Megacable with Spek, on the "What are you buying" thread but didn't want to pollute it anymore with something that belongs here.  I'm curious what people think about the pricing power of the business. Spek thinks the economics in mexico are similar to the US.  IIRC, ARPU for the business is only something like 20 dollars a quarter which seems attractive, but it was also growing only 2% or so YoY.  I'm curious what people think of the economics of this business in Mexico. 

[Spekulatius]

There is a pretty good writeup in Valueinvestorclub from 2017 which initially pointed  me to this stock.

https://www.valueinvestorsclub.com/idea/Megacable/1349107714

 

It’s simply a cheap macrothesis stock, betting on broadband penetration in Mexico. I think Mexico is a country where a lot of money can be made in the communication sector. Megacable strong balance sheet with negligible debt somewhat insulated it’s from Mexico’s economic volatility. I also like that they are family controlled and are not part of the Carlos Dlim and America Movil complex.

[cameronfen]

There is a pretty good writeup in Valueinvestorclub from 2017 which initially pointed  me to this stock.

https://www.valueinvestorsclub.com/idea/Megacable/1349107714

 

It’s simply a cheap macrothesis stock, betting on broadband penetration in Mexico. I think Mexico is a country where a lot of money can be made in the communication sector. Megacable strong balance sheet with negligible debt somewhat insulated it’s from Mexico’s economic volatility. I also like that they are family controlled and are not part of the Carlos Dlim and America Movil complex.

 

Thanks that was very useful.  I'll look into it further. 

[Spekulatius]

Q2 results came out a couple of days ago. A decent, but not a great report. Subscriber and ARPU growth, but still somewhat impacted by the relatively bad economy in Mexico.

http://inversionistas.megacable.com.mx/en/reportesEN_pdf/2Q19.pdf

 

The debt is due to the annual dividend payment  and should be eliminated in 2 quarters or so, because they are FCF positive. They are still at a point where they are extending their network to pass more homes.

[Spekulatius]

Q3 earnings are out. Similar to Q2, there is decent revenue growth and some pressure on margins:

http://inversionistas.megacable.com.mx/en/reportesEN_pdf/3Q19.pdf

[Spekulatius]

Q4 results. 11% revenue growth, a lot of Capex, still expanding network and homes passed. YOY comps look a bit better.

http://inversionistas.megacable.com.mx/en/reportesEN_pdf/4Q19.pdf

 

I added a few more shares yesterday towards the close.

[Value92]

Results were good: http://inversionistas.megacable.com.mx/en/reportesEN_pdf/1Q20.pdf

 

 

How do you deal with the past and present of the owner family?

 

https://www.nytimes.com/2002/12/19/business/lawsuit-says-del-monte-sale-was-rigged.html

https://www.jornada.com.mx/ultimas/politica/2019/01/25/impunes-abusos-de-los-bours-el-poder-politico-y-economico-los-cubre-7871.html

https://vanguardia.com.mx/articulo/empresas-del-ex-gobernador-de-sonora-eduardo-bours-evadieron-1600-millones-en-impuestos