Tuesday, November 16, 2010

Replies: A More Balanced View On Green Packet

Got the following set of comments from the posting: Green Packet: 11th Consecutive Quarters Of Losses, 33 Months Of Losses And....

  • A Better PJ said...
    For an infrastructure business GP are doing pretty well with some positive trends on EBITDA, revenues and very importantly customer churn rates of below 5% (below telco sector average) and P1 subscriptions growing by over 20,000 per quarter...without much A&P.

    All of this indicates good progress on service delivery, customer satisfaction and financials.

    Ebitda is validly a more relevant measurement of operational performance for a business in its infrastructure development phase because it indicates more accurately a business's ability to generate cash.

    Real success measurement for a mature broadband/telco p[layer would be the combination of market share (subscribers), churn (satisfaction levels), ARPU (customer value).

    P1 4G has maintained very impressive ARPU (RM 81) and churn (4%) particularly for a start up....so the tipping point will arrive when it reaches a critical mass of subscribers....as indicated by the ebitda positive target of 280,000 subscribers.

    I hope this will help with to balance the impression given by your article(s).

Many thanks for your valued comments and I certainly am more than happy to publish your comments for all to read.

Just a brief comment on the EBITDA thingee. I am sure you are aware that I had been blogging on Green Packet for a long time now. See the label for the rest of the postings. The point is Green Packet had been saying and saying and saying EBITDA positive since Feb 2008. It's now Nov 2010. Now of course, I am more than wrong, but if I were given a choice to make a feedback, I would dearly hope to see the management focus MORE on the company's performance than continuous shouts to the investing public that they are going to be EBITDA positive by such and such a date. To my flawed eyes, they are like desperately trying to sell their company. I would have preferred them to show more and talk less. That's my flawed view.

Now Green Packet had been stressing out loud they can be profitable IF they hit that 280,000 subscribers.

Now I am confused.


Let me use the following article dated Sep 2010, as a point of reference (I do hope the article data is correct): Green Packet: Stepping up subscriber acquisition. The following statement from it.

  • The acquisition of new subscribers slowed to 35,000 in 1Q10, after hitting a high of 43,000 in 4Q09, and declined further to 21,000 in 2Q10. This was partly attributed to the company’s move to focus on enhancing its network quality — including additional capacity for congested sites — and customer service in the last few months.

43,000 in 4Q09, 35,000 in 1Q10 and 21,000 in 2Q10.

Now that's a declining rate, yes?

In 2Q10, Green Packet said it has 196,000 subscribers. ( source: here ) On today's Star Biz article, GPacket aims to double revenue to RM400m, Green Packet said it has 218,000 subscribers. An addition of just 22,000.

Which means 43,000 new subscribers in 4Q09, 35,000 new subscribers in 1Q10, 21,000 new subscribers in 2Q10 and 22,000 new subscribers in 3Q10.

And Green Packet's target is 280,000 by the next 2 quarters.

Well, I am confused and I am asking myself if the 4 most recent quarters of new subscribers growth suggest that the target of 280,000 is possible?


Well I guess it won't be a big deal because all Green Packet has to do is come out and say their target is delayed by another quarter or two.

And then on the Edge Financial Daily: Green Packet on track to be profitable by 1Q

  • Over the years, Green Packet has already incurred RM534 million in capital expenditure


Over rm 534 million spent. Another 40 million is said to be spend on advertising and promotion according to the Business Times article this morning.

Huge numbers eh?

And if and when Green Packet achieves being profitable, I wonder when if they will ever recuperate their cost of investment.


Digital said...

Assuming that GP could maintain the rate of getting new customer at 22000 per qtr, they will never hit the target of 280000 in the next two qtr. Am wondering how they going to do it when their coverage is still not up to par. Dont they know that they got new competitor which will hit the market next few days? New competitors on board means some of their customer will run away as well. So the hit rate of 22000 new customer per qtr may drop too.

mosea said...

Dear Moolah,

Xingquan will be posting its quarterly result tomorrow and would be grateful if you could spare some time to analyse the results for our better understanding. I have been informed that they have RMB 605 million comprising of RM300 million from shoe and RM305 million from apparel for the Spring / Summer 2011 sales or representing a growth of 10% versus year ago achievement.

Moolah said...

mosea: to be honest, let me stress again, there are far too few data on all the chinese shoes company to make a really fair judgement on them.

alex said...

i would not want to make a sweeping statement but honestly i think Gpacket is a doomed company. have you tried using their wimax - the speed really sucks, big time!! RIP CC Puan.

solomon said...

We have to be realistic with the invasion of YES, I dont think GP losses could be narrowed further, they have to find way to reduce the customer attrition soon....

By the way, do we realize the broadband price have been coming down lately. Price war among TELCO started?? Again, we have UNIFI etc. So many choices, would investor start to rethink about the company prospect?? Maybe everyone have the answers in their hearts now kua??

mosea said...


Yes, I do agree with you but then again its (most of them in fact)PE is so low that you can help but to watch them carefully. At times, you may think if this is too good to be true. Having said that, I have analysed your observation on Xingquan and would like to share some other info viz:-

Xingquan's Revenue from 2006-2009, CAGR 43%
Gross profit, CAGR52%
Cash equivalent RM100 million
EPS for 2009 was 34 sen and based on current px of RM1.60, PE is 4.7
Secondary listing in Taiwan which you have covered.
CIMB marked Xingquan as outperform with target price of RM3.49.

Yes, I know you are not a sotong but these are some info which I gathered from everywhere.

Hope you could comment a little once the result is out.

Thank you and best regards,

Simon said...

can talk about HOVID?
i am bored about GP already

you kept it till now is it?

A Better PJ said...

Fair reply Moolah. my take...

Customer Acquisition Rates...
I also notice that these slowed in the middle of the year which they explained as a result of reducing there A&P while they sorted out their network capacity issues.

In their own announcements they are targeting the 280,000 during Q4 of 2010 on the back of a new A&P campaign...but you're right, its a tall order. However as you point out they have achieved 43,000 in a single quarter last year, on a much smaller/weaker network.

The EBITDA Thingee...
A critical measurement for investors, especially for a start up company, is to see whether an operation has the ability to generate cash. If it has you have many more options available for funding business expansion.

Capital Expenditure, RM 534m and rising...
that's what it takes these days...as a minimum. YTL have projected a capex of 2.5bn, it will take that for each of the mobile telcos to upgrade to a comparable 4G LTE.

Institutional investors will take in interest in this stock after 1 or 2 profitable (EBITDA) quarters, at which time trading volumes and price would shift substntially.

The opportunity for the private investor is to take a view on if/when this would happen and to get in just ahead of the institutions and to make that assessment you would need to be tracking the key numbers of EBITDA, revenue, ARPU and churn.

You would also need to take a view on how it differentiates from the other wireless broadband competitors and whether the product range, packages and promotions can deliver their targets.

That's why I would take a close look at their model, their strategy for differentiation and growth, and their management team, to see if there is an opportunity for a discounted investment.

A Better PJ said...

AHH, yes....as "Simon" said...Hovid.

Now that's another interesting story.

on one side a pharma business without a clear growth strategy, or not one they have presented to the market.

And on the other side a resource hungry (money and management) bioscience business.

Carotech is clearly a drag on Hovid and should be separated entirely as they appeal to different investor types and need entirely different approaches to management, strategy and leadership.

my humble opinion.

Simon said...

i see no hope on GP. I even prefer timecom than GP since timecom is GLC while GP is island.

A Better PJ said...

I view this from an international and long term perspective. I currently hold no shares in GP (or Hovid) but as a non-Malaysia with international interests I see 4 high interest categories ... communications (broadband and telco), biosciences (hence the passing interest in Hovid), green technologies and alternative energy.

The communications landscape throughout Asia will evolve dramatically and will be driven by a shift in customer behaviours (for example look at how Google or the itouch created new categories).

Hence I am looking at GP and others from the perspective of future-fit to entirely new behaviour patterns. What interests me therefore is to see how GP infrastructure has been overwhelmed by high consumption of its relatively young customers who are downloading massive volumes of data at relatively low cost.

This leads me to ask...which service provider will be best adapted to this type of consumer demand into the future because that is the one which will grow the most/fastest. I take a pragmatic view on short term performance as simply a means to an end. Therefore it is too early in my opinion to overlook GP (or for that matter YTL) until we see what their long term strategy is and how effectively they can operate their core business.