Morningstar

Morningstar, Inc.

Equity Bottom-Up

We lift our fair value estimate on Spark New Zealand 3% to NZD 3.80 (AUD 3.65 at current exchange rate), mainly reflecting higher than previously expected cost-saving retention from the Quantum program. Indeed, the transformation and Agile initiatives (NZD 26 million in labour savings) single-handedly drove the 4% lift in fiscal 2019 first-half underlying EBITDAI to NZD 489 million, an increase that other legacy telecom operators would drool over.
Analyst: Brian Han

Adjusted for the NZD 20 million gain from asset sales last year, the 4% lift in Spark New Zealand's normalised EBITDA to NZD 1,038 million was in line with our expectations, as was the 6% rise in underling net profit after tax to NZD 420 million. The board declared a final DPS of NZD 0.125, 75% imputed--an amount that has been well-flagged for some time.
Analyst: Brian Han

We retain our NZD 3.70 (AUD 3.45 at current exchange rates) fair value estimate on Spark New Zealand, with its shares now trading at a 10% discount to this intrinsic assessment. The fiscal 2018 interim result was largely in line with our expectations, with management reiterating full-year guidance across all relevant metrics. Consequently, our earnings estimates are unchanged.
Analyst: Brian Han

Spark New Zealand harbours a long-term aspirational goal of achieving low-30% group EBITDA margin. This is above the 27.0% average over the past five years, and meaningfully ahead of our 27.1% average EBITDA margin forecast for the next five. It naturally prompts the question: why are we so conservative on the narrow moat-rated group?
To begin with, there are one-off costs to the Quantum programme, a project recently activated to kick-start the margin improvement initiative. Initial expense of…

While narrow moat-rated Spark New Zealand's fiscal 2017 result was in line with our expectations, its underlying quality is solid. The 1% lift in EBITDA to NZD 996 million was delivered despite a NZD 20 million investment to better service customers, cost increases related to recently secured IT services contracts, and initial NZD 8 million in expenses to kick-start the Quantum business simplification program.
Critically, we are comforted by the flat to 2% EBITDA growth guidance for fiscal 2018…

New Zealand

Spark New Zealand Limited (formerly Telecom Corporation of New Zealand Limited) provides digital communications, entertainment and IT services over its networks and the Cloud to New Zealanders and businesses. The Company's strategy is focused on mobility, data and effortless service, and cost.

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