racemize Posted December 8, 2011 Share Posted December 8, 2011 I've held this one in the past, but I had a stroke of luck when I sold it for a gain to switch into BRK in the august lows (oh how I wish I could see 66 again). It appears to be fairly cheap now. Anyway, it has a massive dividend, which they insist is sustainable, although my certainty isn't 100%. It is also beaten down with the rest of Europe, despite the fact that it has a lot of exposure to Latin America cell phone growth. However, I dont like the amount of debt that they have. Further, their near term growth will be impacted since they can't borrow as much (will bring down the ROE to their ROTC levels) and because of the European softness. It seems like this is a good play long term and you get paid while you wait. Any thoughts? Link to comment Share on other sites More sharing options...
oddballstocks Posted December 8, 2011 Share Posted December 8, 2011 This post might be of interest: http://valuestockinquisition.wordpress.com/2011/11/24/telecoms-are-the-present-dividends-sustainable/ He looks at a few of the biggest Euro telcoms and examines if the dividends are sustainable. Link to comment Share on other sites More sharing options...
racemize Posted December 8, 2011 Author Share Posted December 8, 2011 thanks oddball, I think his conclusions aren't bad, though in the case of TEF, the latin america growth may allow for TEF to do better in terms of overall growth than the other telecoms (though admittedly, I do not know much about them). I also failed to mention that Berkowitz just invested with TEF, which renewed my interest. Link to comment Share on other sites More sharing options...
MrB Posted December 8, 2011 Share Posted December 8, 2011 Main question is where are they in the Capex cycle. Any idea? Link to comment Share on other sites More sharing options...
oddballstocks Posted December 8, 2011 Share Posted December 8, 2011 If you want Latin America go for America Movil over TEF, I own AMX (so maybe I'm biased...), ROIC, ROE, growth rate and margins are much better. As for the capex cycle I can only speak of AMX since that's what I know they are working on rolling out 4G which will be a pretty significant upswing. For AMX at least I think it'll be a slower rollout just based on the economics of the customers. In a developed country the new technology is expected to be everywhere, in the US I can get 3G in a lot of rural areas. This is a huge expense with a low marginal return. For Latin American/South American countries a rollout isn't nationwide, it's usually in urban areas. So in that regard capex is a bit more limited, and the growth is more profitable because the towers are more profitable. Link to comment Share on other sites More sharing options...
racemize Posted December 8, 2011 Author Share Posted December 8, 2011 my understanding is that they are in the process of bringing costs down (e.g., layoffs and restructuring), so capex should be lower in 2012. As for infrastructure upgrades, I haven't heard any comments or news indicating that they would be implementing any major projects, but I've also been away from the stock for a few months. I'll try to dig into this a little more. Link to comment Share on other sites More sharing options...
racemize Posted December 8, 2011 Author Share Posted December 8, 2011 If you want Latin America go for America Movil over TEF, I own AMX (so maybe I'm biased...), ROIC, ROE, growth rate and margins are much better. As for the capex cycle I can only speak of AMX since that's what I know they are working on rolling out 4G which will be a pretty significant upswing. For AMX at least I think it'll be a slower rollout just based on the economics of the customers. In a developed country the new technology is expected to be everywhere, in the US I can get 3G in a lot of rural areas. This is a huge expense with a low marginal return. For Latin American/South American countries a rollout isn't nationwide, it's usually in urban areas. So in that regard capex is a bit more limited, and the growth is more profitable because the towers are more profitable. I agree re AMX latin america growth, but it isn't nearly as beaten down and doesn't have the huge dividend that TEF has, but perhaps the difference is warranted. Link to comment Share on other sites More sharing options...
oddballstocks Posted December 8, 2011 Share Posted December 8, 2011 If you want Latin America go for America Movil over TEF, I own AMX (so maybe I'm biased...), ROIC, ROE, growth rate and margins are much better. As for the capex cycle I can only speak of AMX since that's what I know they are working on rolling out 4G which will be a pretty significant upswing. For AMX at least I think it'll be a slower rollout just based on the economics of the customers. In a developed country the new technology is expected to be everywhere, in the US I can get 3G in a lot of rural areas. This is a huge expense with a low marginal return. For Latin American/South American countries a rollout isn't nationwide, it's usually in urban areas. So in that regard capex is a bit more limited, and the growth is more profitable because the towers are more profitable. I agree re AMX latin america growth, but it isn't nearly as beaten down and doesn't have the huge dividend that TEF has, but perhaps the difference is warranted. Don't get hung up on dividends The following chart tells the story, AMX and TEF for the last ten years: http://quote.morningstar.com/stock/chart.aspx?t=AMX®ion=USA&culture=en-US&statePara=%7B%22comp%22%3A%22XNYS%3ATEF%22%2C%22evt%22%3A%5B0%2C0%2C0%5D%2C%22period%22%3A%5B9%2C%222001-12-14%22%2C%222011-12-7%22%5D%2C%22display%22%3A%5B1%2C%22lines%22%5D%2C%22indicators%22%3A%7B%22SMA%22%3A%5Bnull%2Cnull%2Cnull%5D%2C%22EMA%22%3A%5Bnull%2Cnull%2Cnull%5D%7D%7D Consider buying these as a piece of the business, would you rather compound your money at 17% or 5%? Even if you can get TEF at 50% off you're still at a compounding disadvantage. They're also not the dominant player in the market meaning they don't have the pricing power or network effects that AMX does. As a general note of interest AMX started as a spinoff, so anyone interested in spinoff investing these are the things you could end up holding. Not too bad.. Link to comment Share on other sites More sharing options...
racemize Posted December 8, 2011 Author Share Posted December 8, 2011 regarding the comparison, I don't think the price movement represents that much (at least to me). The underlying earnings growth has been fairly similar over that time frame. Accordingly, the price movement has had more to do with the P/E multiples--e.g., TEF had a P/E of 48 in 2000 and has a lower P/E than AMX now. All that being said, going forward the returns may be similar. In a rosy scenario, if TEF returns to a normal P/E of 13ish and resumes growth after European sluggishness, plus the huge dividend, the TR may very well compete or beat AMX. That being said, AMX appears to be a more sure bet, but that seems to be why it is relatively more expensive. Link to comment Share on other sites More sharing options...
oddballstocks Posted December 8, 2011 Share Posted December 8, 2011 regarding the comparison, I don't think the price movement represents that much (at least to me). The underlying earnings growth has been fairly similar over that time frame. Accordingly, the price movement has had more to do with the P/E multiples--e.g., TEF had a P/E of 48 in 2000 and has a lower P/E than AMX now. All that being said, going forward the returns may be similar. In a rosy scenario, if TEF returns to a normal P/E of 13ish and resumes growth after European sluggishness, plus the huge dividend, the TR may very well compete or beat AMX. That being said, AMX appears to be a more sure bet, but that seems to be why it is relatively more expensive. I wouldn't rely on P/E expansion to realize the investment value, this is why I said that AMX can compound capital at 17% vs TEF's 5%, this is the difference. If both companies are exposed to the exact same conditions the profile of AMX guarantees they will do better without any P/E expansion. Link to comment Share on other sites More sharing options...
racemize Posted December 16, 2011 Author Share Posted December 16, 2011 dividend reduced: http://www.bloomberg.com/news/2011-12-14/telefonica-says-it-plans-to-reduce-2012-dividend-to-1-50-euros-from-1-60.html Link to comment Share on other sites More sharing options...
racemize Posted April 18, 2012 Author Share Posted April 18, 2012 starting to look at this again--lower Forward Year dividend and earnings (from ValueLine) produces: P/E of 6.36 and dividend yield of 11.26% Also (and I know this was quite a while ago), Oddball, I'm still not sure where you get the compounding of 17% versus 5% of TEF in the previous comments--where does TEF's 5% come in? Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 18, 2012 Share Posted April 18, 2012 starting to look at this again--lower Forward Year dividend and earnings (from ValueLine) produces: P/E of 6.36 and dividend yield of 11.26% Also (and I know this was quite a while ago), Oddball, I'm still not sure where you get the compounding of 17% versus 5% of TEF in the previous comments--where does TEF's 5% come in? Me2, I would check the Argentina thread for recent events and evaluate a margin of safety. Cristina bullying utility related stocks. It is finning Telefonica Argentina for a recent "blackout". Link to comment Share on other sites More sharing options...
PlanMaestro Posted July 26, 2012 Share Posted July 26, 2012 Suspends dividend. 5y lows. Link to comment Share on other sites More sharing options...
racemize Posted July 26, 2012 Author Share Posted July 26, 2012 Suspends dividend. 5y lows. Fully suspended? I've been watching it drop, but was not expecting that. Link to comment Share on other sites More sharing options...
ubuy2wron Posted July 27, 2012 Share Posted July 27, 2012 Suspends dividend. 5y lows. Fully suspended? I've been watching it drop, but was not expecting that. Yup divvy eliminated with a view to restarting in a year with a smaller divvy. Snr mgrs and directors pay cut as well. I have a small position recently initiated was not able to get any of the ADR @ 10.10 with my GTC order. Link to comment Share on other sites More sharing options...
PlanMaestro Posted July 28, 2012 Share Posted July 28, 2012 Preparation for an IPO of Telefónica Germany in the fourth quarter. Telefónica Chile and Brazil already public. Link to comment Share on other sites More sharing options...
PlanMaestro Posted December 6, 2012 Share Posted December 6, 2012 Telefonica Seeks as Much as EU6 Billion in Latin IPO by selling a stake of 10 percent to 15 percent. http://www.bloomberg.com/news/2012-12-05/telefonica-seeks-as-much-as-eu6-billion-in-latin-america-ipo-1-.html Link to comment Share on other sites More sharing options...
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