I had promised to get back to you all with any info on
broadband wireless players. Coincidentally, Steve G has
over the last couple of days been posting various broker
reports. They mostly have been on WCII, but some discuss
other players. I have not found the best play in the fbbw
equipment makers, and instead have opted at this point for a
position in Winstar, which has already been referred to on
this thread. This post lists a number of the players:
From: SteveG
Wednesday, Aug 11 1999 10:25AM ET
Reply # of 594
LEHMAN BROTHERS INC.
Headline: WinStar Communications: Reports 2Q Results In Line With Expectations
Author: William Garrahan, Geoff Stricker
Rating: 1
Company: WCII
Country: SEO CUS
Industry: TELECM
Ticker : WCII Rank(Old): 1-Buy Rank(New): 1-Buy
Price : $46 52wk Range: $64-10 Price Target (Old): $70
Today's Date : 08/11/99 Price Target (New): $70
Fiscal Year : DEC
------------------------------------------------------------------------------
EPS 1998 1999 2000 2001
QTR. Actual Old New Old New Old New
1st: -2.54A -3.72A -3.72A - -E - -E - -E - -E
2nd: -2.77A -3.63E -3.53A - -E - -E - -E - -E
3rd: -2.83A -3.55E -3.26E - -E - -E - -E - -E
4th: -3.80A -3.42E -3.17E - -E - -E - -E - -E
------------------------------------------------------------------------------
Year:$-11.96A $-14.32E $-13.68E $-11.10E $-10.54E $ - -E $ - -E
Street Est.: $-14.27E $-14.09 $-12.52E $-12.47 $ - -E $ - -E
------------------------------------------------------------------------------
Price (As of 8/11): $46 Revenue (1999): 431.2 Mil.
Return On Equity (99): N/A Proj. 5yr EPS Grth: N/A
Shares Outstanding: 49.7 Mil. Dividend Yield: N/A
Mkt Capitalization: 2.29 Bil. P/E 1999; 2000 : N/M; N/M
Current Book Value: $-6.89 /sh Convertible: YES
Debt-to-Capital: 132.0 % Disclosure(s): C
------------------------------------------------------------------------------
------------- Conclusion ----------------
2Q Revenue and EBITDA in line with expectations and 2Q on-net installs of 33K
was ahead of our 31K, with 48% of installs on-net this shows significant
improvement up from 30% in 4Q demonstrating that the technology is proving
in. Continued strong on-net installs (represent 27% of total lines) support
our thesis that broadband wireless technology will prove in 1999.
------------- Comments ---------------
Revenue (Mil.) : $96.5M, 2% above our est of $94.7M and up 9.5% Q/Q
CORE Revenue : $77M, up 12% Q/Q on strong data and Internet revenue
Gross Margin : 24%, up 110 bps Q/Q. Company reiterated confidence in
reaching 35%+ gross margins by 4Q
EBITDA : ($83.1M), in line with our ($82.3M)
Installs : 69K, above our est. of 67.5K
Wireless Installs : 33K, above our 31K est, on-net lines are 27% of base
Reporting Period --------------- Earnings Review --------------------
2Q99 - Expected - - Reported - Seq. Growth
$ $ $ %
Revenue (Mil.) : 94.7 96.5 8.4 9.5%
CORE Revenue : 77.4 76.9 8.3 12.1%
Gross Margin : 25.4% 24.0% +110 bps
EBITDA : (82.3) (83.1)
Installs : 67.5K 69.0K
-----------------------------------------------------------------------------
2Q REVIEW
WinStar reported 2Q in line with our revenue and EBITDA expectations. Gross
margin was 24% (in line with consensus, slightly less than our 25% estimate)
up 110 basis points vs. 1Q. The company reiterated its confidence in
reaching 35%+ gross margins by 4Q, implying 400-600 basis points improvement
in gross margin each of the next 2 quarters. The company installed 69K
access lines in 2Q with 48% of the installs or 33K on-net, 2K ahead of our
31K est. The company also reported 40% of installs were data lines ahead of
1Q's 30%, Avg. on-net bldg penetration reached 16% (ahead of 14% in 1Q), and
62% of newly installed customers purchased multiple services. The company
also reported that is has $2.5B in cash and financing (including Lucent
financing) which funds the company's business plan through the end of 2000.
NETWORK DEPLOYMENT
The company continues to make progress on its network buildout, reporting the
following highlights:
1) 97 hub sites operational with 43 more under construction and leases
obtained for another 29 sites.
2) WinStar is targeting 135-145 operational hubs by the end of '99 and 250 by
the end of '00,
3) 5500 roof rights and on track to reach 8000 by year-end,
4) 2000+ buildings with radios at the end of 2Q,
5) 31 domestic markets in operation, on track to reach 45 by year-end, and
6) Point-to-Multipoint on track for 4Q deployment with the company currently
ordering equipment with 2 vendors
INTERNATIONAL
WinStar reported continued progress in its international expansion plans. In
May, the company started to put customers on its wireless network in
Amsterdam and believes it might see some revenue impacts by the fourth
quarter. In addition, WinStar launched service in Japan (via its joint-
venture with KDD) and is still targeting 5+ international markets in
operation by the end of the year.
EXECUTION AND DEPLOYMENT ARE KEY CATALYSTS
As we said when we launched coverage we expect execution and deployment to be
key catalysts for the stock and in proving the validity of the technology.
WinStar is currently on target to have 200k wireless lines installed by year
end with 50% or more of each quarters installs on the wireless radio.
4Q98a 1Q99a 2Q99a 3Q99e 4Q99e
WinStar
Installs 62K 65K 69K 75K 81K
Installs on Wireless 17K 28K 33K 41K 50K
Percent 30% 44% 48% 55% 61%
Total Lines 319.5K 384.5K 453.5K 528.5K 611.5K
Wireless Lines 64K 92K 122K 163K 213K
Percent 20% 24% 27% 31% 35%
VALUATION
WinStar is valued at $4.2B or $140 per addressable line. This compares with
Teleport and MFS that were acquired for $12B apiece or $350/addressable line.
WinStar is trading at 6.7X '00 revenue which values it in line with the group
despite being the furthest along in deploying and installing customers on its
scare broadband wireless network.
FD Net Firm FV/'00 FV/'00 Rev FV/'99
Price Shares Debt Value Rev to Growth PP&E
WCII 46 65M $1.3B $4.2B 6.7x 0.15x 4.3X
TGNT 58 5/16 62M $0.2B $3.8B 32.0x 0.32x 9.3X
NXLK 80 7/8 67M $1.5B $6.9B 16.5x 0.33x 6.1X
CTC 16 1/4 18M $ 5M $298M 1.3x 0.03x 4.2X
ELIX 12 9/16 50M $0.4B $1.0B 4.6x 0.10x 1.6X
ICG 17 11/16 55M $1.5B $2.5B 3.7x 0.12x 2.0X
ICIX 20 13/16 66M $2.8B $4.1B 3.6x 0.12x 2.4X
MCLD 23 5/8 159M $0.8B $4.6B 4.0x 0.11x 4.7X
TWTC 24 1/8 108M -$0.1B $2.5B 7.5x 0.20x 3.4X
Stock prices as of 8/10/99
BUSINESS DESCRIPTION: WinStar is using high capacity wireless local
technology to bypass the RBOCs to provide high speed data and voice services
to business customers. |
