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Pros And Cons Of A Charter

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Charter: Past as prologue: By emulating the success the company achieved with old Charter between 2012 and 2016, we believe new Charter can grow operating free cash flow in the high teens percentages per year through 2019. Further, by holding leverage at 4x and instituting a share buyback plan, we believe CHTR can grow operating FCF/share in excess of 25% within the same period. Assuming no major acquisitions through 2019, we believe Charter can generate sufficient free cash flow to repurchase ~25% of its current float by 2019. • Positives/potential catalysts: 1) Declining capital intensity combined with healthy EBITDA growth should translate to industry-leading FCF growth. 2) Ample EBITDA margin expansion prospects from a) fixed cost synergies; b) reduced …show more content…

4) Video subscriber growth opportunity by leveraging cross-selling opportunities into the broadband-only base. • Threat from OTT services appears manageable: While OTT cannibalization impacts on the video segment bear monitoring, cablecos' broadband offerings provide a meaningful hedge. Third-party VOD and authenticated streaming usually perform better over cable broadband than most telco/satellite networks (except for FTTP) given the advantages of the cable plant. Additionally, the integration of SVOD services such as Netflix and Amazon Prime into cable offerings provides a means of transferring content costs from the operator to the consumer, potentially reducing programming expenses. • Valuation: Our $325 DCF-derived price target employs a 7.5% discount rate and 9.0x terminal year EBITDA multiple. We forecast residential customer growth of ~200-400bps through 2019, as Charter continues to gain traction from its improved HD offering, faster broadband speeds, and higher triple-play penetration. We expect residential revenue per customer to grow ~100-200 bps p.a. from through 2019, leading to a ~7-8% EBITDA growth rate over that time. Estimated

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