Best time to buy over last ten years?
Spark has a long history dating back to the Telecom New Zealand days. But the demerger of the landline and fixed fibre business Chorus, saw a 'new Telecom', which by the time AR2014 came out was renamed Spark. Spark came out fighting as a retailer into the new competitive market place, with Vodafone (now One New Zealand) and 2 degrees as significant other players. That means FY2014 is a reasonable 'base reference year' from which to assess the 'new Spark', shed of the old Telecom baggage.
I have been a Spark shareholder all of that time. Each year I note down the share price on 30th September. That is typically about six weeks after the annual result is released to the market. That is enough time for analysts to digest the results and get recommendations out to their clients. Thus by that date, Mr Market has had a good chance to assess fair value of Spark shares.
Spark has never been a 'get rich quick' share. But it has always been a reliable dividend payer, and I use the metric of 'historic gross dividend yield' as my measuring stick. So I ask the question, "When has been the best time to buy Spark?" in that context. What does the data say?
Year |
Dividends as Declared |
Gross Dividends |
Gross Dividend Total |
Share Price 30-09-20xx |
Gross Dividend Yield |
FY2014 |
8.0c+8.0c |
11.11c + 11.11c |
22.22c |
$2.97 |
7.48% |
FY2015 |
9.0c+9.0c |
12.50c + 12.50c |
25.00c |
$2.98 |
7.48% |
FY2016 |
11.0c+12.5c |
15.28c + 17.25c |
32.53c |
$3.61 |
9.01% |
FY2017 |
12.5c+12.5c |
17.36c + 17.25c |
34.61c |
$3.65 |
9.48% |
FY2018 |
12.5c + 12.5c |
17.22c + 16.15c |
33.37c |
$4.05 |
8.24% |
FY2019 |
12.5c + 12.5c |
16.15c +16.15c |
32.30c |
$4.41 |
7.32% |
FY2020 |
12.5c + 12.5c |
16.15c + 16.15c |
32.30c |
$4.70 |
6.87% |
FY2021 |
12.5c + 12.5c |
17.36c + 17.36c |
34.72c |
$4.78 |
7.26% |
FY2022 |
12.5c + 12.5c |
17.36c + 17.36c |
34.72c |
$5.00 |
6.94% |
FY2023 |
12.5c + 13.5c |
17.36c + 18.75c |
36.11c |
$4.81 |
7.51% |
FY2024 |
13.5c + 13.5c |
18.75c + 18.75c |
37.50c |
$4.06 (2) |
9.24% |
Notes
1/ Some samples of how the gross dividend calculations were made in the above table follow:
Gross Dividend Calculations
FY2017 P2:12
11.0c (Ordinary, 100% imputed) + 1.5c (Special, 80.6% imputed):
= 11.0c (FI) + 1.209c (FI) + 0.291c (NI) = 11.0c/0.72 + 1.209c/0.72 +0.291c = 17.25c (gross dividend)
FY2018 P1:
11.0c (Ordinary, 100% imputed) + 1.5c (Special, 75% imputed):
= 11.0c (FI) + 1.125c (FI) + 0.375c (NI) = 11.0c/0.72 + 1.125c/0.72 + 0.375c = 17.22c (gross dividend)
FY2018 P2, FY2019 P1, FY2019 P2, and FY2020 P1 (All 75% imputed): 11.0c (ordinary) + 1.5c (ordinary) = 12.5c (total)
12.5c (Ordinary, 75% imputed) = 9.375c (FI) + 3.125c (NI) = 9.375c/0.72 +3.125c = 13.021c +3.125c = 16.15c (gross dividend)
FY2020 P2:
12.5c (Ordinary, 75% imputed) = 9.375c (FI) + 3.125c (NI) = 9.375c/0.72 +3.125c = 13.021c +3.125c = 16.15c (gross dividend)
FY2021 P1, FY2021 P2, FY2022 P1:
12.5c (Ordinary, 100% imputed) = 12.5c (FI) = 12.5c/0.72 = 17.36c = 17.36c (gross dividend)
2/ 30th September 2024 is still in the future as I write this post. Therefore I have used my 11th June trading price of $4.06
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The answer was 2017. But 2024 'right now' is not far away. I think 'right now' is an amazing portfolio building opportunity, the sort of opportunity that only comes along once in every ten years or so. If you are an income investor and don't have Spark in your portfolio now is the time to invest. I have been underweight a bit for a while myself and have been waiting for an opportunity such as this to 'load up'.
So today I pushed the buy button, buying the third tranche of my catch up purchase at $4.06. This goes with the other parcel I bought last month at $4.36 and the third parcel a month before that at $4.68. The parcels were not equal in size. So the average price I have ended up paying was $4.33 per share. I am not too worried about not buying at the absolute bottom though. IMO SPK is currently a massive bargain with a significantly better yield than anything else in the NZX50. It doesn't pay to sweat the cents, and my splitting of my order into three parcels in three consecutive months was part of the 'dollar cost averaging' buy point game that I was playing.
I just feel so lucky to be alive at such a time an incredible bargain such as this is available and to have the cash available to take advantage of it. Actually having the cash available wasn't lucky. That bit was planned
SNOOPY
Datacentre profitability (FY2024 perspective)
Quote:
Originally Posted by
kiwikeith
I do wonder if the market is taking account of Spark's data centre potential. The development pipeline could increase total capacity from 22MW to 93 MW.
I have just had another look at the HY2024 presentation material from Spark, kiwikeith. Slide 11 on "Data Centre Growth Ambition" is of particular interest.
"• Targeting returns of ~9-10% over time as utilisation scales."
And what does 'returns' mean in this context?
Quote:
Originally Posted by
Snoopy
10/ Spark is looking for a 'return' of 9-10% ('return' meaning, a 'net operating profit after tax' over 'invested capital') on data centres once operating at capacity. Third party partners may be brought in to help fund these data centres. A 9-10% return ensures that the IRR is above WACC. The signed customer contracts include an inflation adjustment element This is a higher return that global hyperscale data centres are generating. But remember, global hyperscale is on a 'next level' compared to Spark 'hyperscale'.
Slide 6 from HYP2024 suggests that data centre revenue for Spark is on track to be $35m for FY2024. Exactly how much of that revenue flows straight to the bottom line (to NPAT) is another matter.
Spark's 'flagship' datacentre opened in Takanini in 2014 with a mere 2.3MW capacity (albeit still significant back in the day) and at a cost of $60m.
https://aecom.com/nz/projects/projec...i-data-centre/
A major update has been completed, lifting capacity at that site to 12.3MW, out of a total Spark built capacity to date of 22.3MW. 22.3MW is up from a total built capacity of just 10MW at EOHY2023 one year earlier. The built capacity is continuing to increase. But for the purposes of this exercise, I am going to assume that the total billed load for Spark datacentres amounts to 22.3MW per year over FY2024.
Spark noted that from 8th April 2023, they had budgeted between $250-$300m to expand their data centre capacity over three years.
https://www.datacenterknowledge.com/...5g-in-new-plan
That is what it will take to complete a 70MW expansion of the data centre portfolio, with both greenfield and brownfield additions and amounts to a cost of $3.57m-$4.28m per MW. If I backdate the 'higher cost bound' of that 'cost range' across the 22.3MW of data centres fully built, I get an historic cost to build of $4.28m/MW x 22.3MW = $95.6m. Lets add a 20% odd factor of safety to that total (because I suspect on a per MW basis historical build costs were higher) and call it '$120m spent on data centres to date', in round figures. We know that Spark estimates they will earn 9-10% on their initial outlay. I will call it 9% because 10% is when the equipment is fully utilised, (and we know even with Sparks diligent pre-selling these centres are never 100% utilised on day 1) . So expected annual earnings (NPAT) from the Spark data centre portfolio over FY2024 is to be: 0.09 x $120m = $10.8m.
If the data centre revenue prediction of $35m is accurate, this represents a net profit margin for data centres over FY2024 of: $10.8m/$35m= 30.9%
SNOOPY