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Megacable - #CotD 2:5
With 4.1 mm unique subs (incl 3.75 mm broadband), Megacable is Mexico's #2 cableco. It's an example of a non-US $BYTE Index holding in last-mile connectivity.
High-Single Digits % Sub Growth + A Few % Price = Secular Growth near 10% p.a.
🧵👇
Megacable - #CotD 2:5
With 4.1 mm unique subs (incl 3.75 mm broadband), Megacable is Mexico's #2 cableco. It's an example of a non-US $BYTE Index holding in last-mile connectivity.
High-Single Digits % Sub Growth + A Few % Price = Secular Growth near 10% p.a.
🧵👇
EBITDA margins for non-US cablecos are often higher than in the US, as the cost pressure of video is less acute.
OTOH, ongoing capital intensity also tends to be higher, esp. for EM-based cos actively doing new-builds.
Mega:
50% EBITDA Margins and 30%+ CapEx as % Revenue.
2/
OTOH, ongoing capital intensity also tends to be higher, esp. for EM-based cos actively doing new-builds.
Mega:
50% EBITDA Margins and 30%+ CapEx as % Revenue.
2/
Given "EM risk" & higher capital intensity, Mega trades at a large discount to US comps:
<4.5x 2021E EV/EBITDA.
US cablecos are 8-12x and often carry 4-5x in debt! Compare to Mega's Net Debt/EBITDA @ 0.6x.
When Mega slows its growth CapEx phase, might its FCF margin expand?
3/
<4.5x 2021E EV/EBITDA.
US cablecos are 8-12x and often carry 4-5x in debt! Compare to Mega's Net Debt/EBITDA @ 0.6x.
When Mega slows its growth CapEx phase, might its FCF margin expand?
3/
Even with large Growth CapEx (including fiber upgrades), Mega's EBITDA - CapEx - Interest - Taxes leaves ample Pre-Tax Equity FCF. It uses this to pay a meaningful & growing dividend: a 4.2% yield today.
In pesos, Mega's dividend has CAGR'd in the teens for the past 5 yrs.
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In pesos, Mega's dividend has CAGR'd in the teens for the past 5 yrs.
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While the peso isn't a strong currency, it's been ok the past 5 yrs, leaking ~1.6% p.a. vs USD.
Mega has raised prices slightly in excess of its Fx headwind, w/ ARPU ranging from +2-5% over the same period.
In peso terms, Mega's had 15 yrs of uninterrupted top-line growth.
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Mega has raised prices slightly in excess of its Fx headwind, w/ ARPU ranging from +2-5% over the same period.
In peso terms, Mega's had 15 yrs of uninterrupted top-line growth.
5/
Mega has a two share class structure, through which the founding Bours family owns >60% of the co.
As the 2nd largest cableco in Mexico, Mega could likely find a suitor. But don't expect it: Mega remains in investment phase and doesn't appear to be positioning for a sale.
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As the 2nd largest cableco in Mexico, Mega could likely find a suitor. But don't expect it: Mega remains in investment phase and doesn't appear to be positioning for a sale.
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All investments have risks. Mega's include:
- Domicile
- Currency
- Insider control
- Huge ongoing investment cycle
Like many digital infra cos, Mega's shown strong predictability & resilience, allowing for inflation+ pricing, recurring revenue, growth, & strong margins.
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- Domicile
- Currency
- Insider control
- Huge ongoing investment cycle
Like many digital infra cos, Mega's shown strong predictability & resilience, allowing for inflation+ pricing, recurring revenue, growth, & strong margins.
7/
Note - I never intend Tweets as investment advice. This is meant as a basic, high-level overview of what Megacable does and how one might begin to look at the business.
-End-
Please Like, Follow, & RT if you find these useful.
2 down, 3 to go! 🤸♀️🤸♂️
-End-
Please Like, Follow, & RT if you find these useful.
2 down, 3 to go! 🤸♀️🤸♂️
https://twitter.com/compound248/status/1453731224267026439?s=20
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