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Srikanth Iyer Telecom Corp of New Zealand NZT-N TOP PICK Jun 22, 2011

New Zealand telecom. 6.5% yield. Free cash flow yield of 7%. An undervalued regulated utility. Will be split into 2 companies.

Srikanth Iyer

Owned

Unlock Rating

$9.720

Stock price when the opinion was issued

Utilities

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TOP PICK

Wanted a bit of Geographic diversity. Has watched this for a while. Value investors have liked it for a while and rode it down. Used to have a monopoly and now is having to evolve. It is going to do ok over the next few years because New Zealand is an isolated country.

STRONG BUY

8-9% dividend yield. With the earthquake in New Zealand, there was a bit of a withdrawal in cap X there. This company has wings and it will fly when it starts to raise dividends and the cap X cycle starts to improve.

DON'T BUY

The majority telephone provider in New Zealand. Doing relatively well and has a reasonable dividend. Losing landline as people switch to mobile. Way below where it was 3-4 years ago.

BUY

Telecom in New Zealand. Trades at 10X earnings with about an 8% yield. Very solid company. Has done a great job of slowly growing itself.

PAST TOP PICK

(A Top Pick March 16/11. Up 110.31%.) This is the dominant carrier in New Zealand. Smart phones are producing a lot of revenue for the carriers. Have a policy that when they are making money, 90% of it goes to shareholders.

COMMENT

Is the 9.5% dividend safe? If there is a decline in the currency, it could be affected. Recently spun off Corus (?) division, which was a one time special dividend, which created a significant spike. Going forward, it will follow the Australian telecom space and bring a broadband network out.

DON'T BUY

Has done well, as has many high dividend paying equities, and will likely continue to benefit. Whenever you are looking at any sort of utility, you want to look to see if the rate of growth of the New Zealand economy. Historically it has not been great, which is one of the reasons they yield is so high. (This stock is no longer listed, so not sure why they didn't mention that. Ed.)

DON'T BUY

Been a couple of changes recently. Has been de-listed and will trade on pink sheets “NZTY”. Recently split off core assets and had a one time special dividend. You have to see the plans post-restructuring.

BUY

Caller can't find any earnings. ADR was delisted. You have to go to New Zealand web sites for the financial results for New Zealand telecom. It has held up well during the global financial crisis. This and Vodaphone are the two big players there. It’s a good company and he would add to it at this point. It is difficult to get a trade executed in New Zealand.

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Srikanth Iyer Telecom Corp of New Zealand NZT-N TOP PICK Jun 22, 2011

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