7/23/2018
American Tower Corp (NYSE: AMT)
AMT is a REIT (Real Estate Investment Trust) that specializes in broadcast towers with exposure to the U.S., Asia/India, and Latin America for Cell, TV, radio, and wireless.
Price at write-up $140.84
Indexes (30, 180 day looks)
VIX: 12.62 (-8.35%, -25.24%)
TED: 35.26
S&P500: 2807 (2717, 2670)
Valuation Ratios
MarketCap 62.2B
Target : $140-160
The premise of buying shares of this company is that it owns real-estate and operates businesses related to broadcast services making it of interest for all the standard cellphone reasons. This would be a way to bet on the growth of that market without betting on a particular provider. It operates in the U.S., India, Germany, Ghana, Nigeria, South Africa, Uganda, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru. A nice basket of growth and established areas. Additional plots of land for towers is declining as legislation restricting thier placement has increased, making current plots more valuable in the classic limited real estate pricing scenario but limiting future expansion.
My Thoughts
I don't understand the valuation here. It's been missing earnings consistently for the past 3 years, in this day and age "analyst guidance" are just the companies internal forecasts - meaning these guys are seriously out of touch and have been for a while. Furthermore, Earnings growth has leveled and is expected to decline suggesting this is as good as it gets, meaning it's not a growth company.
If it's not a growth company, I expect some nice dividends. And the apparent mad rush to buy this REIT against all good sense has dropped it's relative yield to 2.19% (CDs with zero risk are available at 1.95%) if this stock was priced at a more reasonable $52 a $2 dividend (3.8% yield) would be more impressive, even better if the yield was closer to 5%. This can never be however with it's low operating earnings of 2.1% not to mention that it's EPS is 2.58, $0.50 less than it's actual dividend. This can occur after a few rich years, particularly if it's unwinding it's outstanding shares and debt which admittedly many (such as KO) are doing this year. Its net income was 1.2B, and AMT's total dividend paid was 1.1B. AMT's net debt issuance was 1.5B, I'm not a big fan of this Cashflow statement.
The book value is outrageous, essentially 10x. Typically securities invested in tangible assets are between the lows of 0.8 to 3x on the high side. If a company has significant intellectual property/capital, however, the rules change a bit on the future value of those assets and the book value approaches 5. Alphabet, for example, has a book value of 5.23 So the market is telling me that there is something about AMT that makes it's assets more valuable than those of Alphabet/Google? Really? Ok. . . But Apple's book value is 7.47. So the future value of AMT's assets are greater than that of Apple? That's simply absurd.
How is the short interest only 1.37%?
Conclusion
I have no explanation as to why AMT is so highly valued by the market, it's balance and cash flow sheets don't look good, it's operating earnings are low, it's missing earning consistently, it isn't a growth security, and doesn't have a world-changing idea.
I also briefly looked at the comparables and I just don't get it. The idea sounds nice, but when you look at the actual business it's just garbage across the board.
AMT probably would've been great to pick up in 2013, but if I owned it since then I'd be selling it now. Let these fools have it. If I had the patience and stomach for long shorts, I'd consider it.
Due Diligence - CCI, EQIX, SBAC
American Tower Corp (NYSE: AMT)
AMT is a REIT (Real Estate Investment Trust) that specializes in broadcast towers with exposure to the U.S., Asia/India, and Latin America for Cell, TV, radio, and wireless.
Price at write-up $140.84
Indexes (30, 180 day looks)
VIX: 12.62 (-8.35%, -25.24%)
TED: 35.26
S&P500: 2807 (2717, 2670)
Valuation Ratios
| Price/Earnings (TTM) | 54.32 |
| Price/Sales (TTM) | 9.22x |
| Earnings per share | 2.58 |
| Price/Book (MRQ) | 9.79x |
| Price/Cash Flow (TTM) | 21.94x |
| Held by institutions | 93.37% |
| Short interest | 1.37% |
| Dividend | 2.19% |
MarketCap 62.2B
Target : $140-160
The premise of buying shares of this company is that it owns real-estate and operates businesses related to broadcast services making it of interest for all the standard cellphone reasons. This would be a way to bet on the growth of that market without betting on a particular provider. It operates in the U.S., India, Germany, Ghana, Nigeria, South Africa, Uganda, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru. A nice basket of growth and established areas. Additional plots of land for towers is declining as legislation restricting thier placement has increased, making current plots more valuable in the classic limited real estate pricing scenario but limiting future expansion.
I don't understand the valuation here. It's been missing earnings consistently for the past 3 years, in this day and age "analyst guidance" are just the companies internal forecasts - meaning these guys are seriously out of touch and have been for a while. Furthermore, Earnings growth has leveled and is expected to decline suggesting this is as good as it gets, meaning it's not a growth company.
If it's not a growth company, I expect some nice dividends. And the apparent mad rush to buy this REIT against all good sense has dropped it's relative yield to 2.19% (CDs with zero risk are available at 1.95%) if this stock was priced at a more reasonable $52 a $2 dividend (3.8% yield) would be more impressive, even better if the yield was closer to 5%. This can never be however with it's low operating earnings of 2.1% not to mention that it's EPS is 2.58, $0.50 less than it's actual dividend. This can occur after a few rich years, particularly if it's unwinding it's outstanding shares and debt which admittedly many (such as KO) are doing this year. Its net income was 1.2B, and AMT's total dividend paid was 1.1B. AMT's net debt issuance was 1.5B, I'm not a big fan of this Cashflow statement.
The book value is outrageous, essentially 10x. Typically securities invested in tangible assets are between the lows of 0.8 to 3x on the high side. If a company has significant intellectual property/capital, however, the rules change a bit on the future value of those assets and the book value approaches 5. Alphabet, for example, has a book value of 5.23 So the market is telling me that there is something about AMT that makes it's assets more valuable than those of Alphabet/Google? Really? Ok. . . But Apple's book value is 7.47. So the future value of AMT's assets are greater than that of Apple? That's simply absurd.
How is the short interest only 1.37%?
Conclusion
I have no explanation as to why AMT is so highly valued by the market, it's balance and cash flow sheets don't look good, it's operating earnings are low, it's missing earning consistently, it isn't a growth security, and doesn't have a world-changing idea.
I also briefly looked at the comparables and I just don't get it. The idea sounds nice, but when you look at the actual business it's just garbage across the board.
AMT probably would've been great to pick up in 2013, but if I owned it since then I'd be selling it now. Let these fools have it. If I had the patience and stomach for long shorts, I'd consider it.
Due Diligence - CCI, EQIX, SBAC