Value Investors Should Not Overlook Volkswagen [View article]
CEDUP, see the first graph. The group structure is quite complex. VW owns Porsche AG, but Porsche SE is VW's major shareholder. Indeed, China has become VW's biggest single market, but Europe as a whole is still VW's major market.
Value Investors Should Not Overlook Volkswagen [View article]
Thanks for the comment. Because the European auto market is very weak and VW still sells around 35% of its vehicles to Western Europe. I think until the outlook doesn't turn brighter for Europe, VW will remain undervalued. However, this may also present an opportunity for those willing to wait.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Yes, I agree with you that the question is valuation. What I am skeptical is that the worst is behind for FTE. But I have to do more research on that, to have an opinion supported by data.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Thanks for sharing your thoughts. I'm considering doing a more detailed analysis of FTE, focusing on its domestic division. I think it is the company's weakest link, and crucial to a re-rating of its stock.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
No trouble, I like to discuss different opinions and your point on relying on cash flow instead of earnings is very valid. Although I don't think the worst is over for FTE, I may be wrong and in that case the upside potential will be huge given FTE's undervaluation compared to peers.
Another point, don't you think 5 stocks is not enough to construct a diversified portfolio? Although I also don't like to buy a lot of stocks, I usually target at least 10-15 stocks (long and short) for my portfolio.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
I see your point. To use price per share to calculate FCF yield, you should use free cash flow to equity instead of what I'm doing with free cash flow to firm and enterprise value. Nevertheless, as FTE has more debt than VOD my conclusion will be the same using FCFE.
Based on my data, and as I said before, VOD has its dividend amply covered by free cash flow. For 2013 it will have £0.1485 and £0.157 for 2014. Dividends per share will be around £0.11...Regarding FTE, I'm sorry I was using €1.40 dividend per share. With €0.80 dividend per share, its free cash flow coverage is slightly higher than for VOD. However, I think FTE has less earnings visibility than VOD and analysts may adjust downwards their estimates over the next few months.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Kaptain haddok, My data source is Bloomberg (professional terminal instead of website) so we may be using different data and thus reaching different conclusions because of that. I'm not an American as you can see on my profile, and I don't have access to Merrill research...
I calculate free cash flow yield as FCF/Enterprise value. I use free cash flow to firm (before interest and dividend payments). From the data I collected, VOD has a higher FCF yield than FTE for 2012 and 2013 (Bloomberg estimates). Its coverage based on FCF (FCF share / Dividend per share) is also higher for VOD, at 135% in 2012 and 143% in 2013 versus 89% and 95% for FTE. All calculations were performed by myself, based on the data I've taken from Bloomberg.
Moreover, as you can see from my article I do consider VOD to be a better choice than FTE based on business fundamentals. FTE is too much reliant on its domestic market, which is facing a price war because of Iliad (a new competitor).
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Thanks for the comment. It's not just for telecom companies that you have to look for cash flow generation instead of earnings.Dividends are paid with cash but usually management is very reluctant to cut it even if earnings or the cash flow decline substantially. To see if it is sustainable, you should look for a medium to long-term series, instead of just one data point. The reason is that on one year cash flow may not be enough to cover dividends, but if it is due to cyclical factors much probably management will keep the dividend unchanged. However, this will mean that cash on the balance sheet will decline or that debt will increase, which overtime isn't sustainable. Regarding FTE and VOD, currently VOD has a 6.7% free cash flow yield versus 5.8% for FTE but over the last few years FTE had a slightly higher average yield than VOD.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Thanks for the comment christophe. Yeah, for value investors I agree Europe may offer some opportunities. Valuations are cheaper than in the U.S. but it's also needed a better economic outlook to fill the gap. I don't see it happening over the next few months, but for long-term investors it may be a good timing to start accumulating some stocks.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Thanks for the comment. As I said before, VOD has a good dividend quality but I don't expect it to grow as before. Regarding FTE, although I have a bearish view much of it is already reflected on the stock price. As you can see from the table at the beginning of the article, FTE is trading at lower multiples than peers. If you have a long-term view you may consider to hold your position to see if things improve but if you are concerned about more capital losses than your should consider to sell, at least part of your position.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
All European telecoms companies are facing strong headwinds. VOD is obviously also affected but its higher diversification make it less painful. FTE is too much reliant on France, where competition is forcing a price war. It may be approaching its end, but it only means operating trends will stop declining, I don't see any improvement in the short-term.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Thanks for your comment. I didn't include Telefonica because its dividend is suspended. Regarding data traffic, it is the main revenue growth source telecom companies have in matured markets. However, as technological evolution is very fast, they have to invest a lot of resources on improved infrastructures. Although it can be postive for revenue and profits, it will be negative for cash flow generation at least in the short-term.
Value Investors Should Not Overlook Volkswagen [View article]
Value Investors Should Not Overlook Volkswagen [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
France Telecom: A Buy After Dividend Cut? [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Another point, don't you think 5 stocks is not enough to construct a diversified portfolio? Although I also don't like to buy a lot of stocks, I usually target at least 10-15 stocks (long and short) for my portfolio.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Based on my data, and as I said before, VOD has its dividend amply covered by free cash flow. For 2013 it will have £0.1485 and £0.157 for 2014. Dividends per share will be around £0.11...Regarding FTE, I'm sorry I was using €1.40 dividend per share. With €0.80 dividend per share, its free cash flow coverage is slightly higher than for VOD. However, I think FTE has less earnings visibility than VOD and analysts may adjust downwards their estimates over the next few months.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
My data source is Bloomberg (professional terminal instead of website) so we may be using different data and thus reaching different conclusions because of that. I'm not an American as you can see on my profile, and I don't have access to Merrill research...
I calculate free cash flow yield as FCF/Enterprise value. I use free cash flow to firm (before interest and dividend payments). From the data I collected, VOD has a higher FCF yield than FTE for 2012 and 2013 (Bloomberg estimates). Its coverage based on FCF (FCF share / Dividend per share) is also higher for VOD, at 135% in 2012 and 143% in 2013 versus 89% and 95% for FTE. All calculations were performed by myself, based on the data I've taken from Bloomberg.
Moreover, as you can see from my article I do consider VOD to be a better choice than FTE based on business fundamentals. FTE is too much reliant on its domestic market, which is facing a price war because of Iliad (a new competitor).
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
It's not just for telecom companies that you have to look for cash flow generation instead of earnings.Dividends are paid with cash but usually management is very reluctant to cut it even if earnings or the cash flow decline substantially. To see if it is sustainable, you should look for a medium to long-term series, instead of just one data point. The reason is that on one year cash flow may not be enough to cover dividends, but if it is due to cyclical factors much probably management will keep the dividend unchanged. However, this will mean that cash on the balance sheet will decline or that debt will increase, which overtime isn't sustainable. Regarding FTE and VOD, currently VOD has a 6.7% free cash flow yield versus 5.8% for FTE but over the last few years FTE had a slightly higher average yield than VOD.
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
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France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
France Telecom, Deutsche Telekom Or Vodafone: Which Is Better For Income Investors? [View article]
Regarding data traffic, it is the main revenue growth source telecom companies have in matured markets. However, as technological evolution is very fast, they have to invest a lot of resources on improved infrastructures. Although it can be postive for revenue and profits, it will be negative for cash flow generation at least in the short-term.