Thursday, November 18, 2010

More Chat On Green Packet

  • 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

Some second opinion from me. I could be wrong, so do take your dose of garam.

  • 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.

Let's consider the 43,00 new subscribers issue.

As you have pointed out, 43,000 new subscribers were added during a much smaller/weaker network. Now I assume that you are suggesting that now things are different and I would assume that Green Packet's P1 'had' improved to a 'bigger/stronger' network. I hope this is a fair assumption. But if this is the case, why the rather drastic slowdown in new subscribers growth rate? Remember it went from 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. I would be wrong but since if the network is bigger and stronger, than naturally P1 would be getting more subscribers?

Food for thought: Almost a year ago, Nov 2009, I posted the following: P1 Wimax: Honey Have You Cut It? Part II. I made the following exercise:

  • Ever tried google the phrase 'wimax problems' and limit your search to pages from Malaysia? (try this google search link: here )

Just now, I tried a new search. I search for 'p1 wimax problems 2010' or http://www.google.com.my/search?hl=en&q=p1+wimax+problem+2010&aq=3&aqi=g2&aql=&oq=p1+wimax+prob&gs_rfai=

Some 2010 posts of interests.

And the EBITDA.

  • 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.

A crticial measurement? I am sorry but perhaps I am a lousy investor because what I feel is even more critical is the BOTTOM line. The moola. Yes, show me the money. End of the day, is the profit that counts and not the measurements. And what is more critical the I-T-D-A in that formula is a reality. The INTEREST is real. TAXES are real. DEPRECIATION and AMORTISATION of assets/plants/machinery are real. End of the day, these items matters to the investor. The profit is what's most important, for me. And yes, I beg to differ but it's rather pointless to talk about EBITDA. Not for me. And if anyone disagrees, well I would more likely to step back and say I am flawed. That's my opinion. Yeah, and it's not an important one, since many would be quick to point out there are many ways to make money in the stock markets.

Anyway, since you talked about the ability to generate cash, now that's an interesting issue.

Sep 2009, the following was posted: Would You Want To Invest In Green Packet?

  • As per Green Packet's report, it had 242.467 million then and no debts!
    A company which was flushed with cash.
    All 242 million! And this was for financial period ending 31/12/2007.

That was before Green Packet decided to dive into Wimax.

Now I would not use current Green Packet's earnings as a comparison because it's cash was boosted by SK Telekom 322 million Convertible Preference Share exercise. Instead I would use the numbers posted in Aug 2010.

And during this period...

  • Aug 2009. Green Packet raised some 98 million via rights issue.
  • Jan 2010. Green Packet raised some 69.176 million from a share placement.

So from a company that had cash of 242.467 million for the period ending 31/12/2007, the company turned into a company having 102.800 million cash and some 264.214 million by Aug 2010. And the company raised some 167.176 from corporate exercises like rights issue and share placement.

Well I might be wrong again but I just don't see how and where Green Packet was generating any cash at all.

  • Capital Expenditure, RM 534m and rising...
    that's what it takes these days...as a minimum...

And that's exactly the point.

The capital expenditure is simply mind boggling. And yes, I was shocked to read that another 40 million is said to be spend on advertising and promotion according to the Business Times article the other day.

So the simple question I would ask is if this Wimax business is even viable? Spending millions and millions to achieve how much profit?

I take a look at some of the big names.

Do they even have profits?

Perhaps one day Green Packet could make money. Yeah, never say never. :=).

However, the thing I would ask again is if the money made could ever justify all the money spent?

ps: If I am a potential investor, I would ask myself a simple question. Why insist on this one?

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1 comment:

  1. tklaw4:14 PM

    EBITDA has been widely use by the companies to evaluate the profitability of a newly start-up capital intensive company. If I were the major shareholders of the company, I would concern of EBITDA since I have to take long term view of the company. As a retail investor, I would say it is an accounting gimmick. Betting our hard earned money on EBITDA??? Why not PBT?

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