Guest hellsten Posted June 13, 2013 Share Posted June 13, 2013 I found nTelos in the cannibals thread. nTelos doesn't seem to be a cannibal. I had a quick look at the company anyway, because I know some people here like DISH and CHTR. DISH Kicks "Plan B" Into Action http://www.fool.com/investing/general/2013/05/25/dish-kicks-plan-b-into-action.aspx "By working with nTelos, we believe we can create a service that simultaneously addresses the mobile and in-home requirements of rural residents," said DISH chairman Charlie Ergen. This program will also serve as a test bed for larger deployments of DISH's portfolio of spectrum licenses, "with the potential to serve as a model for how we can utilize spectrum more effectively while creating differentiated consumer offerings." http://seekingalpha.com/article/1410101-ntelos-holdings-management-discusses-q1-2013-results-earnings-call-transcript?part=single That's helpful. And Jim, you mentioned taking share, who you're taking share from year-to-date? James A. Hyde - Chief Executive officer, President and Director Everybody. I don't want to sound flippant in my remarks, but I mean, I've been -- I track this net porting results very, very carefully. We also get market share information obviously from various third-party data sources. And we are taking share from all of our competitors in the markets in which we cover right now. James A. Hyde - Chief Executive officer, President and Director Sure. On the dividend, as always, we'll continue to evaluate that on a quarterly basis, just as we always have done. I now remind you, we finished the first quarter with nearly $100 million of cash on the balance sheet and certainly, we continue to generate solid cash flow from our operations. So to that end, we feel comfortable that we've got the flexibility to continue to invest in our business in such a way that maximizes value creation for all of our stakeholders going forward. Quadrangle is a big owner: http://www.quadranglegroup.com/FirmOverview/Portfolio/Company.aspx?id=12 NTELOS - 10% Yield With Dish Or Sprint Takeover Potential http://seekingalpha.com/article/1466561-ntelos-10-yield-with-dish-or-sprint-takeover-potential Ntelos: A Telecom With a Big Dividend and a Big Target on its Back http://seekingalpha.com/article/252724-ntelos-a-telecom-with-a-big-dividend-and-a-big-target-on-its-back NTELOS: Strong Company with Superior Management http://seekingalpha.com/article/172026-ntelos-strong-company-with-superior-management "nTelos was one of the first small carriers to land the iPhone, and now its adding to its prestige by launching a new LTE network. Not bad for a little rural carrier": http://gigaom.com/2013/03/27/tiny-ntelos-will-join-the-4g-club-launching-lte-in-the-virginias-this-year/ Link to comment Share on other sites More sharing options...
Packer16 Posted June 13, 2013 Share Posted June 13, 2013 This is an interesting company with what I think has good upside but a significant risk. One item of note is the roaming agreement with Sprint which may be jeopardy if the Sprint/Softbank deal goes through as Sprint can over build the NTELOS network and save significant costs for modest cap-ex. If DISH can get Sprint then it may be a different story. At one time this risk was reflected in the stock price lesser so now. The wireless BB JV with DISH is another interesting upside catalyst. You do have a PE firm Quadrangle which has a good sized ownership so there is an incentive to sell at some point. Packer Link to comment Share on other sites More sharing options...
bizaro86 Posted February 4, 2014 Share Posted February 4, 2014 This one has always interested me, although I've never pulled the trigger. It's come off lately, which inspired this SA writer to do an update: http://seekingalpha.com/article/1987341-ntelos-holdings-faces-competitive-pressures-but-carries-a-great-yield Link to comment Share on other sites More sharing options...
Packer16 Posted January 10, 2015 Share Posted January 10, 2015 This is a very interesting company that has had a disaster 2014. Alot of uncertainty maybe not so much risk. It began with a signing of an extension of the Sprint deal a positive. Then the CEO resigned, the company decided to exit its Eastern markets and the stock tanked from $20 to $4. Not alot has changed other than it will get kicked out of indicies and it is exiting an unprofitable market (which it should have) and the CEO left. It is selling for 4.1x conservative 2015 EBITDA estimates of $104m. If all costs savings happen then the number will be closer to $115m. The companies have been bought out at multiples of 6x + and larger players currently trade for 7x. At 6x this is triple. The debt was recently extended to past 2017 and the company has a restricted cash basket of about $56m for which it can pay dividends or buy-back stock. The current market cap is only $85m. The debt has about a B rating and the company is paying LIBOR plus 4.75% interest. The largest equity hold is Quadrangle at 20%. Packer Link to comment Share on other sites More sharing options...
simplefocus Posted January 10, 2015 Share Posted January 10, 2015 Hi Packer, This company looks interesting. Did you initiate a position? Do you know the estimated 2016 EBITDA after existing Eastern markets? Thanks. Link to comment Share on other sites More sharing options...
KJP Posted January 10, 2015 Share Posted January 10, 2015 See slide 16 for a bridge to 2016 EBITDA: http://content.stockpr.com/ntelos/db/Presentations/1294/pdf/Investor+Presentation.pdf Link to comment Share on other sites More sharing options...
Packer16 Posted January 11, 2015 Share Posted January 11, 2015 I did initiate a position. My 2016 estimate is the 2015 estimate plus $11 million cost savings plus 3% growth. What is interesting is in the Western Region, NTelos has subscriber additions along with revenue increases (these are not obvious from the filings but some simple subtraction the data can be derived). Packer Link to comment Share on other sites More sharing options...
Libs Posted January 11, 2015 Share Posted January 11, 2015 Latest quarter had 'increased equipment and network costs' per the 10-Q, which really drove down EBITDA year over year. Any concerns about that? Interesting idea, thanks. Link to comment Share on other sites More sharing options...
tombgrt Posted January 11, 2015 Share Posted January 11, 2015 CEO leaving, getting kicked out of indices and exiting an unprofitable market shouldn't be enough to let the stock drop as much as it did. No other funny business going on? Link to comment Share on other sites More sharing options...
Packer16 Posted January 11, 2015 Share Posted January 11, 2015 Those cost modestly decreased the EBITDA margin from 39.1% to 37.2% but the really big driver was the $9.0 million in settlement revenue from Sprint in 3Q 2013. If that is added back then the decline is smaller. The decline is a result of lower wholesale revenue as Western retail revenue increased. I believe the decline is a one-time decline for the new Sprint agreement. Packer Link to comment Share on other sites More sharing options...
jrunner Posted January 11, 2015 Share Posted January 11, 2015 This is not within my circle of competence, but I dug into it a little because some of numbers look promising. One of my concerns was the company's ability to service its debt. I then found this line in the Risks section of the 10-k: ' The aggregate scheduled maturities of such long-term debt, based on the contractual terms of the instruments, are $5.4 million in 2013, $5.3 million in 2014, $150.3 million in 2015, $3.6 million in 2016 and 2017, and $331.6 million thereafter.' Note the big payment upcoming in 2015 (and 2017) which will almost certainly exceed earnings. Given this, the market may be more accurately pricing this than it initially seemed to me (even at $3.99/share). Link to comment Share on other sites More sharing options...
Packer16 Posted January 11, 2015 Share Posted January 11, 2015 If you look at the latest 10-q, the re-financed the debt and extended the maturity to 2018. Packer Link to comment Share on other sites More sharing options...
jrunner Posted January 11, 2015 Share Posted January 11, 2015 Thanks, Packer. I thought I might be missing something. It certainly will make things look more favorable for the next few years. Is there an advantage for ntelos to carry so much debt? Link to comment Share on other sites More sharing options...
Laxputs Posted January 12, 2015 Share Posted January 12, 2015 Just did some work on nTelos. Thanks for the idea. Seems pretty compelling. The investor presentation and 10-Q breaks out the numbers of the Western regions. Management gives guidance. So it seems like earnings can be reasonable estimated. The 56mm spectrum asset sale could be considered offsetting to the 55mm estimated Eastern Market wind-down costs (only 15mm of that is realizable in 2015). And they plan to sell some towers and spectrum in the non-core regions. I think I would just use this as added margin of safety in my valuation. 2016 EBITDA = ~117mm (2015 guidance of 105 + 3% growth + 9mm in overhead savings from discontinued E-Markets.) Assuming they convert 15% of EBITDA to cash or debt payment after their capex plans (capex expected to be slightly less than EBITDA as they build out 4g LTE with expected completion in 2017), I get 265% upside from today's price using a 6x EBITDA multiple. If it takes until Jan 25 2017 to realized, that's 89% IRR. Obviously the time frame and whether they get a 5x-6.5x multiple is huge. Here are some questions I'd like input on: 1. Is 3x interest coverage enough MOS even though they have consistent and dependable earnings? 2. What does 2019 debt repayment look like? (10-Q states debt due after 2018, not in 2018). So it is refinanced with quarterly/yearly payments at that point? Lump sum would not be required, correct? 3. Will the market rerate them to 6x EBITDA if their cap-ex spending is still going strong? (completion date of 4gLTE is 2017). 4. Will the market rerate them to 6x EBITDA if they are a small time 500'000 subscriber base company with 4.5x debt to annual EBITDA? 5. They state "9% of Western Virginia Market share". I assume they lost E-Market share due to competitive pressures. If they are not dominant in W-Market at 9%, what keeps them from losing their position (even if it looks like their subscriber base is growing right now)? On January 15 they will be dropped from the S&P600 small cap, so if I buy I'll wait and see if there is extra selling pressure on that date. TIA Link to comment Share on other sites More sharing options...
Laxputs Posted January 14, 2015 Share Posted January 14, 2015 Bump. Link to comment Share on other sites More sharing options...
mankap Posted January 20, 2015 Share Posted January 20, 2015 NTELOS Holdings Corp. Announces Towers Sale and Provides Western Markets Preliminary Fourth Quarter 2014 Subscriber Results I think NTLS is moving on its previously announced restructuring plan. Laxputs, Do you know how will they use cash. Are they going to use it to retire debt. Link to comment Share on other sites More sharing options...
Laxputs Posted January 20, 2015 Share Posted January 20, 2015 Just checked my notes and I don't see anything about cash plans but I could have missed it. I spent a few hours on this company but passed when I couldn't find answers to my questions above. I want to be very sure about their competitive position when they have so much debt. I think there are safer companies out there. But I'm not really the one to ask. Link to comment Share on other sites More sharing options...
Packer16 Posted January 21, 2015 Share Posted January 21, 2015 The coverage at 3.4x is about a BB grade bond, typical for a telco. If you use the cash to pay down the debt you are down to 4.5x you are closer to BBB. They would most likely re-fi the debt and keep the company levered like other telcos. 6x EBITDA is very modest in terms of multiple. When they are at maintenance level of capex, 2018, they will have an estimated EBITDA - cap ex value (20% margin) of $121 - $40 = $81m. Less interest expense of $377 * (5.75%) = $22 is value of $59m. Little or not taxes due to D&A sheltering plus changes in WC of lets say $10 gives you a FCF of $49m in 2018. With a market cap of less than $90m, you have FCFx of less than 2x. In addition, they have an option to purchase with $56 million (pre-sale of assets) either common shares or a dividend. This bucket should go up if they retain cash from sales. Packer Link to comment Share on other sites More sharing options...
Laxputs Posted January 21, 2015 Share Posted January 21, 2015 Really interesting. Thanks for the laid out math. Any comments on them selling assets in Eastern Virginia? If they were competitively viable they likely would not have sold. If they were vulnerable in the East are they vulnerable in the West? They describe a competitive landscape in Western Virginia in their statements and their market share in single digits. Link to comment Share on other sites More sharing options...
lathinker Posted January 21, 2015 Share Posted January 21, 2015 Thanks for posting this idea which I find highly interesting. I put together a very simplistic Cash model which I would like to share and on which I would be interested to get thoughts. This is modelled based in management`s Dec presentation. Risks I see include: - Competitive market and NTLS facing competitors with more resources. Their advantage is to be concentrated and focusen on one area where they have to win. - Potential affitional capex needs as 4g will not be the end of the story. - Refinancing risk and risk of higher rates making their debt more costly. Potential upside from further cost efficiency or of they manage to gain meaningful scale. Packer, why do you think 56mm USD are available for dividend/share repurchase? My understanding is that they will be used to pay the winddown costs in Eastern markets. LTNTLS_Cash_Model.xlsx Link to comment Share on other sites More sharing options...
muscleman Posted January 24, 2015 Share Posted January 24, 2015 Thanks for posting this idea which I find highly interesting. I put together a very simplistic Cash model which I would like to share and on which I would be interested to get thoughts. This is modelled based in management`s Dec presentation. Risks I see include: - Competitive market and NTLS facing competitors with more resources. Their advantage is to be concentrated and focusen on one area where they have to win. - Potential affitional capex needs as 4g will not be the end of the story. - Refinancing risk and risk of higher rates making their debt more costly. Potential upside from further cost efficiency or of they manage to gain meaningful scale. Packer, why do you think 56mm USD are available for dividend/share repurchase? My understanding is that they will be used to pay the winddown costs in Eastern markets. LT Sorry I didn't understand the difference between 2015 and 2016. The numbers all look similar, so how did they suddenly have a slightly positive EBT in 2016? Link to comment Share on other sites More sharing options...
Packer16 Posted January 24, 2015 Share Posted January 24, 2015 Thanks for posting this idea which I find highly interesting. I put together a very simplistic Cash model which I would like to share and on which I would be interested to get thoughts. This is modelled based in management`s Dec presentation. Risks I see include: - Competitive market and NTLS facing competitors with more resources. Their advantage is to be concentrated and focusen on one area where they have to win. - Potential affitional capex needs as 4g will not be the end of the story. - Refinancing risk and risk of higher rates making their debt more costly. Potential upside from further cost efficiency or of they manage to gain meaningful scale. Packer, why do you think 56mm USD are available for dividend/share repurchase? My understanding is that they will be used to pay the winddown costs in Eastern markets. LT The $56 million would come from the license and tower sale. The wind down costs will be incurred over time so the $55 million will not be needed in 2015 and the total proceeds will be close to $86 million. This assumes current cash flow will cover cap ex per guidance. Packer Link to comment Share on other sites More sharing options...
lathinker Posted January 25, 2015 Share Posted January 25, 2015 Sorry I didn't understand the difference between 2015 and 2016. The numbers all look similar, so how did they suddenly have a slightly positive EBT in 2016? This is mostly driven by their expectation realizes some savings from corporate overhead cost. They expect to save 20mm USD in total but only 9-12mm of that in 2015. So I expect another 10mm USD in savings for 2016. Also, my model assumes them to be cash positive and accordingly be able to reduce their net debt over time, so that they will incur lower net interest costs in 2016. lathinker Link to comment Share on other sites More sharing options...
Packer16 Posted January 25, 2015 Share Posted January 25, 2015 Attached is a revised version of lathinker's version of the model including NOL effects, normalizing EBITDA-Cap Ex to 20% of sales and including interest expense at LIBOR + 4.75% with a 1% floor. PackerNTLS_Cash_Modelv2.xlsx Link to comment Share on other sites More sharing options...
lathinker Posted January 26, 2015 Share Posted January 26, 2015 Packer, thanks a lot for your input and help in straightening out the model. lathinker Link to comment Share on other sites More sharing options...
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