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SURW - Surewest


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Since the SURW thread has gone the way of the sunset, and I still think SURW has plenty of upside from here, I will start this new thread.  Current metrics look pretty good for a cable overbuilder with an ILEC attached.  Even with the recent run-up SURW still trades at only 4.8x EBITDA and has an unlevered FCF yield of 14.4% and levered FCF yield of 24.3%.  These metrics are at a significant discount to cable and overbuilder peers but more inline with smaller ILECs.  As Harry has stated, management appers to be entrenched.  They have started a small dividend but the value is in the overbulider properties.  They have little debt and thus could be a leveraged buyout target like RCN.  I have seen this story play out twice before (once with NTL and once with RCN).  At this point, this still is one my highest upside stocks.

 

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Packer - why do you look at EBITDA for SURW instead of FFO or AFFO?  Interest expense is likely pretty high for a levered company, wouldn't it make more sense to compare that?

 

I have no experience with high debt companies and am trying to get more insight.

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I look at EBITDA - maintenance cap ex which is significantly less than cap-ex as SURW has a large amount of cusotmer install cap-ex.  The maintenance cap ex is on the order of $15m so versus an EBITDA of $83m so the multiple goes down a little.  I use EBITDA in capital intensive low maintancne cap-ex situations.  Another metric similar to FFO is FCF with maintenance cap-ex which is another metric I look at.

 

 

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  • 2 months later...
  • 6 months later...

Harry,

 

        Thank you for such a great idea.

 

Consolidated Comms. buying SureWest at 47% premium

By Greg Morcroft 2%0%-2%-4%10a11a12p1p2p3pCNSL SURW NEW YORK (MarketWatch) -- Consolidated Communications Holdings Inc. /quotes/zigman/96483/quotes/nls/cnsl CNSL +0.68% said on Monday that it is buying SureWest Communications /quotes/zigman/85911/quotes/nls/surw SURW +3.25% for $23.00 per share, or a total of approximately $340.9 million, excluding debt. The deal values SureWest at a 47% premium.

http://www.marketwatch.com/story/consolidated-comms-buying-surewest-at-47-premium-2012-02-06?siteid=yhoof2

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  • 2 weeks later...

HCOM maybe an early-stage SURW but it still has to roll-out its TV offering.  Once it is rolled out and CF generating (2 to 3 years) it may be able to be comparable to SURW.  The one difference is the access line declines are faster now than when SURW was in a similar situation.  However, I think the cheap valuation more than accounts for this uncertainty.

 

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  • 2 weeks later...
  • 2 weeks later...

Harry,

 

        Thank you for such a great idea.

 

Consolidated Comms. buying SureWest at 47% premium

By Greg Morcroft 2%0%-2%-4%10a11a12p1p2p3pCNSL SURW NEW YORK (MarketWatch) -- Consolidated Communications Holdings Inc. /quotes/zigman/96483/quotes/nls/cnsl CNSL +0.68% said on Monday that it is buying SureWest Communications /quotes/zigman/85911/quotes/nls/surw SURW +3.25% for $23.00 per share, or a total of approximately $340.9 million, excluding debt. The deal values SureWest at a 47% premium.

http://www.marketwatch.com/story/consolidated-comms-buying-surewest-at-47-premium-2012-02-06?siteid=yhoof2

 

I appreciate the support. If you read the Big Big picture thread, I must not be that bright  :)

 

Oh well, what's the old Graham saw?....in the long term, the market is a "weighing" machine. Perhaps the same is true of life.

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