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  • 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
  • Telefonica: Cheap For A Reason (Equity) [View article]
    My pleasure, one of my projects that I am working on at the moment is an update on the Argentine telco sector as a follow-up to my earlier article.
    Aug 6, 2012. 08:32 PM | Likes Like |Link to Comment
  • Telefonica: Cheap For A Reason (Equity) [View article]
    William thank you for raising that issue. Regulatory change in Latam is a key risk being faced by telcos operating in Latam particularly in Brazil, Argentina and Peru. Overall I think the risk of nationalism is low because it takes a distinct level of expertise to effectively run a telco.

    The foreign ownership issue is quite interesting because it depends on the company and the country. In Colombia Telmex which is AMX is resented but the other foreign operators including TEF are not. While in Argentina there has been ongoing resentment towards TEF and also among some people to get TI out of TEO.

    At the moment with Peru and the ongoing issue over ground water pollution and the gold and copper mining protests there has been a tremendous groundswell against all foreign ownership. It is also not unfounded, the environmental record of foreign mining companies operating in Peru such as NEM, ABX and Xstrata to name a few has been abhorrent. This issue is providing fertile recruitment ground for a resurgent Shining Path and has also been a factor in the surge in coca growing in Peru. Overall I wouldn't be investing in any foreign mining companies that operate in Peru, but that is another story.

    Also the level of investment in infrastructure required in Latam is tremendous and if the governments start shutting out or scaring off private business then the money just won't be there to invest in infrastructure. If anything at this stage both Peru and Argentina are placing pressure on the telcos to make their services cheaper, more accessible and reliable along with greater infrastructure development.

    I took a close look at the Argentine telco sector and the risk of nationalization earlier this year where I concluded nationalization more than likely won't occur. But the government will use regulatory and political pressure to drive the outcome they are seeking.
    Aug 6, 2012. 07:11 PM | Likes Like |Link to Comment
  • Ecopetrol's Second Quarter Results Indicate A Disappointing Year Ahead For Investors [View article]
    dgalvan thank you for the feedback. It is always good to get that feedback from a critic of my work and someone such as yourself who has a strong knowledge of Colombian equities as they are still relatively new to me.

    The inspiration for the article came from your comments regarding EC's 2Q performance that you made on Ecopetrol & Petrobras Barometers of . . .

    Thank you for providing the information and insight that you did. While I quite like EC and believe that the company has tremendous potential, hence my positive view, there comes a time when you need to state where the company is at and take a realistic view of whether it will continue to provide value for investors. At this time until management step up and provide a clear strategy of how they will deal with the risks facing the company it is difficult to take a positive view.

    Since publishing the article it is also appearing more likely that additional shares from the government's holding will be offered to the market in 2013, with a bill now before Congress to approve the sale.

    I am working on CIB at the moment and again that it is another favorite company. But it has also reached the point where management can no longer rely upon 'catch-up growth' and need to have a clear executable growth strategy in place in order to continue delivering investors value. I am also quite keen to take a closer look at Davivienda, EEB and Exito.
    Aug 6, 2012. 06:53 PM | Likes Like |Link to Comment