Can't vouch for all the numbers but they look correct:
TWTC DUE DILIGENCE SUMMARY
by: stockphenom
Long-Term Sentiment: Strong Buy 08/22/02 07:04 pm
Msg: 9849 of 9885
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Keep a very close eye on Time Warner Telecom (TWTC) as it has explosive upside potential. 44% owned by AOL, TWTC is currently $1.19 per share (in January it was $19). It appears that few investors are aware of TWTC as a cash rich, conservatively managed telecom with one of the best networks in the competitive local exchange carrier (CLEC) Industry. Basic DD:
LIQUIDITY AND FINANCIAL RESOURCES:
At the end of June, TWTC had $324 million in cash equivalents ($2.80 per share) and $750 million in an undrawn credit facility. TWTC's long-term net debt is a little over $700 million.
AOL TIME WARNER BACKING:
AOL Time Warner holds a 44 percent stake in TWTC.
FINANCIAL METRICS:
-TWTC EBITDA is around $160 MM per year. Most large telecommunications companies have historically traded at a range of 10-12 X EBITDA. If TWTC traded at a 12 EBITDA multiple it would be a $13 stock. TWTC is projecting free cash flow profitability in 2003.
-TWTC has one of most conservative capital structures in the industry. EBITDA covers interest expense by 1.5 times.
-TWTC JUST ANNOUNCED SECOND QUARTER RESULTS. EBITDA WAS $53 MILLION (35% INCREASE FROM FIRST QUARTER EBITDA OF $38 MILLION). CASH INCREASED BY $14 MILLION TO $324 MILLION. EARNINGS PER SHARE OF -$.27 BEAT THE STREET CONSENSUS BY 3 CENTS.
INSTITUTIONAL BUYING:
On June 3, Time Warner Telecom disclosed that Citigroup has purchased 8.4% stake in TWTC. Fidelity Management, the most respected and best performing mutual fund, owns 6.81 %.
BUSINESS MODEL:
TWTC doesn't primarily resell elements from the Baby Bells. Eighty percent of TWTC revenue is carried on its own fiber network. So TWTC provides a distinct choice. Diversity has become extremely important for business customers, especially in light of Sept. 11. They are looking for alternatives because communications services are their lifeblood.
TWTC has focused on profitability, selling products with margin, getting a return on capital investment. TWTC has been EBITDA positive since 1999, which not too many players in the sector can say. TWTC has a lot of assets, lots of major business customers, and a diverse customer base- fundamentally all the right characteristics for success.
TECHNICAL ANALYSIS
TWTC is bouncing strongly off a Friday's ridiculous lows. Nearly 100% of the 41 million float is owned by institutions- resulting in very rapid price appreciation in uptrends. TWTC nearly doubled in 2 weeks in May.
RECENT PRESS COVERAGE:
June 1 Edition of Barrons: Cahill Interview on Telecom stocks:
Q: Do you have another pick?
Time Warner has $315 million in cash beyond its debt obligations. They have $1 billion of available liquidity -- that is, they have another $750 million of undrawn, untapped credit they could pull down whenever they wanted. We don't expect them to have to tap the facility in a meaningful way until late 2004. They can survive on their cash for a long time. The stock is at $2, and it's worth a lot more. It's trading at 5.4 times enterprise value to Ebitda. We find that compelling. We own the stock and the bonds, but your readers might want to stick with the bonds. |
