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  • Endgame: A Book Review [View article]
    Thankyou John a great book review, well written and compelling!
    Aug 12, 2012. 04:03 AM | 8 Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
    Veritas thank you for the comment. I am glad that the article was useful. If anything I agree with some of Igor's points, perhaps if they had been couched in a more qualified manner they would have been more useful.

    However, as a result I have gone back to my FCFE model and I am checking the calcs and re-working my assumptions. Once these are complete I will post the results and if necessary update the article.

    I am quite impressed by the use of Latin, it has taken me sometime to remember Latin from university.
    Aug 9, 2012. 06:01 AM | 1 Like Like |Link to Comment
  • Colombia: Poised To Reach Its Economic Potential [View article]
    Rich thank you for the clarification. I think there is still a substantial amount of growth to be seen in Colombia as it still has the distinct benefit of catch-up growth. it also hasn't moved as far along the development curve as say Peru or Brazil, which means that there is still substantial growth to be seen and opportunity. This catch-up growth is what created the rapid appreciation and will continue to fuel it for sometime yet, if the global economic headwinds or security issues don't interrupt it.

    Overall there aren't signs of an emerging consumer credit bubble, if anything people within Colombia are talking about it because of the inherently conservative nature of the culture and approach to finance combined with a greater awareness/fear of bubbles resulting from Europe particularly Spain and Portugal. But of some concern is that the Colombian economy is incapable of sustaining a high credit to GDP ratio at this time and I doubt that it will be able to do so for sometime.

    I do believe that there has been a significant appreciation in house prices, but if anything I feel that this has happened more so in Medellin rather than Bogota primarily due to the influx of foreign investors buying properties in Medellin. There are also signs of a localized property bubble in Medellin which is becoming increasingly speculative in nature.

    While I have an optimistic view of Colombia's potential there are still risks the primary ones being the security situation, lack of infrastructure, regulatory and political risk. Along with which there are language and cultural barriers.

    For these reasons I always believe that investors should exercise caution but not because of the economic risk but more because of the other risks mentioned. There will reach a time where these economic risks may blow-up but that is sometime off yet, which will give the government sometime to manage them. Although to date the government seems overly focused on FDI and exploiting commodities and exports rather than building a more robust domestic economy. The overarching mentality is one of little to no regulation on the basis that increasing inflows of capital will create growth through the trickle down effect. Which as history has repeatedly demonstrated doesn't work and leads to asset bubbles and rampant speculation.
    Aug 9, 2012. 04:37 AM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
    Hi Larry Telefonica (TEF) which until the suspension of the dividend plan recently had a dividend yield of around 11%.
    Aug 8, 2012. 10:32 PM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
    Igor I have no problem with the criticism and there is no need to apologize for it if it is constructive and evidentary. What was annoying is that at no time did you identify your issues, qualify them or raise any clear concerns other than make a series of all encompassing remarks plainly attacking the quality and validity of the article. This certainly smacked of rhetoric.

    I agree with your views on using ratios to compare and value companies but where space is at a premium and a number of companies to compare it is difficult to use any other comparative system. My preference would also be to use DCF. I also disagree with your assertion that it does a poor job of valuing telcos, I believe that within the scope of the article it provides an adequate though admittedly limited analysis.

    Normally where there is an issue with an article or a point of view I would expect from a fellow contributor a rebuttal based on evidence rather than a series of sweeping generalizations attacking the fundamental credibility of the article. If anything that appears as arrogant and condescending rather than critical and productive.

    If you had raised your issues regarding the calcs initially and qualified your criticism then perhaps we wouldn't be at this point. With regard to the calcs I have not relied upon using FYE 11 figures but completed a TTM analysis utilizing 1Q10 to 1H12 financials including for the CF/Debt ratio. I'd also point out that based on 1H12 financials TEF has total debt of US $89 billion not $75B as you state.

    Furthermore, the point you have raised concerning the use of book value is an interesting point as their are different schools of thought on this. Book value across a number of industry wide comparative surveys has been used to value telcos in different markets and as a means of accounting for the difference in their equity prices. I also understand that book value is not a particularly good measure because of how intangibles are calc'ed.

    While I admit that telcos are not my field of expertise I certainly have not sat down and pulled some figures of Yahoo Finance and based my conclusion on them. Nor have I been as negligent or ill informed in formulating the valuations and article as your previous comment stated.
    Aug 8, 2012. 08:17 PM | 2 Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
    Warren I certainly don't state that TEF is cheap but rather identify that it is trading at close to fair value, which would mean that investors shouldn't be expecting the share price to recover to 2010 levels. The article also is written as an adjunct to my previous 2 articles and is essentially to broaden the conclusions drawn that TEF is a 'value trap'.
    Aug 8, 2012. 06:51 PM | 1 Like Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
    Labutes thank you for the comment. The companies were chosen on the basis that each has significant operations in each of TEF's markets.
    Aug 8, 2012. 06:48 PM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
    Igor thank you for the comment in response I would like to submit the following points for consideration:

    1. A substantial financial model was built using the financials for each of the companies analyzed, obtained from their financial fillings over since Q1 2010.

    2. The article was written as an adjunct to my 2 previous TEF articles which is made quite clear in the introduction and through the article, which adds to the context.

    3. The European exposure for TI and FTE is identified in the risks and also see point 2 above. In addition, space did not allow a detailed analysis of TI's or FTE's businesses and this was clearly outside of the scope of the article.

    4. There are a number of aspects of VOD which on their own require extensive analysis and space didn't allow for that in this article. It is also a comparative analysis focused on TEF not VOD and based on the analysis and ratios discussed drawn from VOD's current accounts the company is sitting at around fair value. The scope of the article is also clearly explained.

    5. I have endeavored to normalize earnings and allow for one time write-offs and asset sales when constructing my financial model. This also included adjusting TEF's OIBDA to be correctly represented as EBITDA by factoring in non-operating income. This was done in an effort to obtain accurate and comparable TTM PEs as I noted that they differ markedly across the industry and when fact checking the article that different information providers are giving different TTM PEs based on the methodology they use to calculate them.

    6. All data used in the construction of the comparison was checked against existing data and all calcs were also checked.

    7. I note that while you criticize the methodology you offer no insight into the argument or a contrary view supported by evidence.

    All in all I would normally expect that any comment that is being so subjectively critical of the methodology used to evaluate a stock or the quality of an article would also be able to offer a contrasting point of view. This would also include explaining how that view was arrived at. Otherwise it adds no value for readers or the author and comes across as nothing more than an exercise in rhetorical egotism.
    Aug 8, 2012. 06:43 PM | 3 Likes Like |Link to Comment
  • Gafisa: A Speculative Play On Brazilian Residential Property [View article]
    bobbobwhite thank you for the comments. I think you have misunderstood the thrust of the article. I clearly explain why Gafisa is in its current position and the risks investors face, while explaining how it presents as a speculative high risk opportunity. In addition, since this article was published GFA has gained 27%, which is a modest gain but a gain nonetheless.

    At no time have I stated or implied that it will return to its pre-crisis levels. Furthermore, a company pulling through a crisis and achieving a target price is far different from returning to a pre-crisis price level as the article explains. I am certainly not arguing that Gafisa will return to its pre-crisis price, nor that its financial position, sales volumes or cash flow will recover to pre-crisis levels. I also believe that Gafisa's pre-crisis price was over inflated and this was caused by primarily U.S investors raking a simplistic and over optimistic view of Brazilian growth. The article also clearly explains the state of the Brazilian housing market and the effects that has on Gafisa along with identifying its level of debt, cash flow and debt servicing issues as key risks.

    All of which explains why the article is called 'A Speculative Play On Brazilian Residential Property'. The investment thesis is essentially that the company is now trading at such low levels in comparison to its fundamentals, while showing signs of improvement that an opportunity exists for risk tolerant investors. I am a little uncertain as to how I can be any more explicit.
    Aug 8, 2012. 06:09 PM | 1 Like Like |Link to Comment
  • Ecopetrol's Second Quarter Results Indicate A Disappointing Year Ahead For Investors [View article]
    DG thank you for the offer and I will be certain to contact you if I need any information, have any questions regarding my analysis or identify any gaps that I can't explain.

    Also thank you for the additional insight on the security situation and how this affects Ecopetrol.
    Aug 8, 2012. 05:20 PM | Likes Like |Link to Comment
  • Buy Westpac: Australian Bank Offers Sustainable 6% Dividend Yield [View article]
    Dividend withholding tax is not applied by the Australian Taxation Office (ATO) on fully franked dividends i.e those where the company has already paid company tax of 30%.

    On unfranked dividends i.e where company tax hasn't been paid, withholding tax is charged at 30%. However, there is a tax agreement with the U.S which lowers this rate to 15% for U.S investors.

    Westpac pays fully franked dividends so no withholding tax is payable by foreign investors.

    The ATO website and foreign tax schedule is available here
    Aug 8, 2012. 08:37 AM | 1 Like Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) [View article]
    adiviono thank you for the comment and the video. I will certainly be having a look. I have recently submitted for publication a follow-up to this piece which is a comparative valuation of TEF to its peers, to make up for the lack of a ratio based valuation in this article, which may offer some additional insight. Although I am not really a big fan of determining if a company is a buy or a sell based on fundamental valuation ratios alone.
    Aug 8, 2012. 02:50 AM | Likes Like |Link to Comment
  • Colombia: Poised To Reach Its Economic Potential [View article]
    Rich thank you for reading. I am unsure what you mean by a new story or bottom floor? I am also a little uncertain as to the point your raising or how it ties in with the article. However, I am more than happy to answer the question if you can clarify it?


    Aug 8, 2012. 02:36 AM | Likes Like |Link to Comment
  • Ecopetrol's Second Quarter Results Indicate A Disappointing Year Ahead For Investors [View article]
    I am hoping that the issues facing Ecopetrol are resolved in the medium to long-term and it has been my preferred choice for exposure to Latam's oil boom. But for these issues to be resolved it will be necessary for management to develop and implement a plan to do so. It is on that basis that I continue to hold EC.

    The issues concerning Colombia's internal security situation are far more complex and it will be many years before they are satisfactorily resolved. The situation is quite fluid and changes weekly. Many within Colombia thought they were a spent force particularly with the death of Alfonso Cano in November of last year. Much of their strength is derived from the general insecurity, poverty , lack of the rule of law and failed government institutions throughout much of Colombia.
    Aug 7, 2012. 03:24 PM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) [View article]
    Nationalism is just an ever present risk of investing in Latam. It is also on the rise in Colombia but tends to have different outlets to other Latam countries.

    I am also currently up a profile on VIV and investigating further the mining sector and recent developments in Peru for future articles.

    With regard to Petrobras the manner in which the current government is using the company as a national policy tool has always been a risk, but even I misunderstood how deep that would go.

    I also believe that the deeper Brazil's problems the more protectionist and interventionist the government will become particularly with the lead up to the FIFA World Cup and the Olympics creating considerable pressure for the government to ensure the success of those games and present a favorable domestic image for the world media that will be present.
    Aug 6, 2012. 11:21 PM | Likes Like |Link to Comment