700 likes | 845 Views
General Body Meeting 10/6/10. Agenda. Announcements Headlines Tech Sector Conviction List Telefonica Pitch. Goldman Sachs Junior Board. October 20 th 10:30AM Location TBD. Buying shares. You are dropped as a junior analyst after today if you still have not invested. iGo Inc. Headline.
E N D
Agenda • Announcements • Headlines • Tech Sector Conviction List • Telefonica Pitch
Goldman Sachs Junior Board • October 20th 10:30AM • Location TBD
Buying shares • You are dropped as a junior analyst after today if you still have not invested
iGo Update • iGo awarded Cisco Flip Video accesories • Flip Ultra has 13% camcorder market • Awarded new patents in September • Using primary side circuit • Individual outlet shut offs • Dual-USB charger • Earnings out 10/22
European Worries • Moody lowered Spain’s credit rating • AAA---Aa1 • Growth expected to lag (1% for several years and 20% unemployment) • Gov’t proposed 7.9% budget cuts and increased taxes • Ireland expected be downgraded again in Jan • Credible cuts vs decreased tax revenue • Anglo Irish Bank Bailout-$46B (total $68B)
Japan • Central bank of Japan push rates to 0% • Bought $60B risky assets (corporate bonds, REITS) • Attempt to battle a strong Yen • Keep at virtually 0% until ends deflationary pressures • Expect Fed to engage in quantitate easing • Estimated in the area of $1 trillion
Hydraulic Fracturing • “Fracking” – the process in which natural gas is extracted by means of pressure-drilling a mix of water, sand, and chemicals more than a mile vertically and horizontally into the earth (99.5% sand and water, .5% chemical) • Currently used in more than 90% of 450,000 natural gas wells without any incident • Fracking is exempt from the Safe Drinking Water Act, which means it is currently not federally regulated • Debate: Does fracking end up polluting water, thereby harming plants, animals, and humans, during the release of chemicals? • EPA (Environmental Protection Agency) is doing a study to be completed in 2012 that will study the health and environmental effects of fracking
What This Means for Energy • It is estimated that 60-80% of new wells need fracking to remain viable • Ban on fracking will mean less reserves and higher natural gas prices • Possible step forward for other cleaner and greener technology (wind, solar) • However, because the report will come out in 2012, this will most likely not affect the companies that we currently invest in (something for current freshman and sophomores to look into )
BP New Executive, New Outlook • New CEO Robert Dudley • Reorganization of firm’s exploration and production business into three divisions – exploration, development, and production • Improved Safety Standards – New Safety Division headed by Mark Bly with additional powers to oversee and audit the company’s operations; internal police force • Remains to be seen if the safety procedures will be implemented
BSQUARE (BSQR) Zach Peskin
BSQUARE - Overview • Expertise in embedded systems • Products: • TestQuest Pro: a test automation tool • SDIO Hx: integration of peripherals with smart devices • Expertise with hardware and software • Major project: Ford’s Synch
BSQUARE - Financials • Market Cap: $33.5 Million • Revenue: $75.5 Million • Gross Profit: $13.5 Million • Quarterly earnings growth: 1,041.7% • Cash per Share: $1.51 • Zero Debt
BSQUARE – Catalyst • Ford (or other automobile maker) could acquire BSQR • BSQR finds another large customer
Verizon (VZ) Josh Lyons
Verizon Communications (VZ) • US-based communications services provider • Broadband, wireless, and wireline services • Over 91.2 million business, government, mass market, and wholesale customers • Wireless voice, data services and other value-added services, voice, internet access, broadband video and data, next generation Internet Protocol (IP) network services, network access, long distance and other services • Price at 10/5/2010, $33.57 (52wk range: 25.99-34.13)
Investment Themes • Net Neutrality: power to the carriers • Joint Google + Verizon proposal • Mobile ISP internet to not be covered by guaranteed neutrality • Carriers able to discriminate on what content goes over their network • Potential to charge premium fees for access to premium online services • Tremendous power for cellular carriers to exploit high value users • Verizon, AT&T, etc, to no longer be a ‘dumb pipe’ • Significant new revenue stream, the effect of which will be compounded by the continuing rise of mobile internet • Verizon to win the 4G war • First rollout of LTE • SIM-based technology • Largest, most stable network • Highest smartphone data rates • End of unlimited data • Rise of Android, CDMA iPhone • Android growth • Exclusive devices, Droid Series • Verizon iPhone in field test stages • Forecasted: January 2011 • Projected 12m annual sales
Telefonica S.A. (NYSE: TEF) Samantha Dong Alex Friedman ShashankSamala Ali Yazdi John Yoshida
Telecom in Mexico • GDP: $1.09 trilliun; Population: 112 million • Mobile Penetration rate: 43% • Currently monopoly economy • Fixed line: 94% by Telmex (AMX) • Mobile: 80% by Telcel (AMX) • Growing competition from 3G spectrum auctions • Nextel got government wireless license
Telecom in Brazil • GDP: US$ 1.58 Trillion; Population: 192 million • Mobile Penetration rate: 90.55%
Brazil – Market Trend • Mature local fixed voice • Lower traffic per terminal (FMS in traffic) • Continued expansion in mobile market • Strong competition • Strong market evolution: pre-paid (naked SIM card) market • Broadband growth accelerating • Competition in areas that concentrate high-end clients • 3G changing dynamics of industry
AMX Overview • Leading telecom provider • Biggest in Mexico, second in Brazil • Wireless, Fixed line, broadband, etc. • Pitched Sep 2008 • Strong presence in Latin America. • Looking for a long term investment: 1-2 years • Price Target at end of 1 year: $60 (22.4% gain)
Performance • 12% return after 2 years $ 54.29 $ 48.61
Breakdown 1 As of June 2010
Recent News – Integrated Service • Fixed line in Mexico: Telmex • Fixed line in Brazil: TelmexInternacional (Embratel), NETC
Brazil • Wireless: Claro • 26% market share, 46.9 million wireless subscribers • Embratel (TII) – Claro (AMX) Merger • Represent 85% of total synergies: cost reduction • Synergies are offset by premium paid • Decreased Revenue forecasts by elimination of intercompany transaction
What We Don’t Like • Focus on less attractive markets • Mexican Market • Growing competition potential hurts AMX • Fixed Line Market • Weaker presence in Brazil wireless market • Stock Valuation
Company Overview • One of the world’s largest telecommunications companies by market cap. (115.66B) • Activities include fixed and mobile telephony businesses, while its broadband business is the key growth driver underpinning both. • Growth strategy is focused on the markets in which it has a strong foothold: Spain, Europe and Latin America
Latin American Market Telefonica Latin America • Fixed telephony accesses = 24,514.90 • Internet and data accesses = 7,911.50 • Mobile accesses = 141,822.20 • Pay TV = 1,735.40 • Total accesses = 176,102.80 Top Latin American Countries (% of total accesses) • Brazil – 71,353.90 (40.54%) • Argentina – 22,396.90 (12.72%) • Mexico – 18,687.50 (10.61%)
European Market Telefonica Europe • Fixed telephony accesses = 3,563.7 • Internet and data accesses = 4,382.4 • Mobile accesses = 45,217.00 • Pay TV = 194.10 • Total accesses = 54,541.60 Top Telefonica Europe Countries (% of total accesses) • UK – 22,255.6 (40.80%) • Germany – 22,006.90 (40.35%) • Czech Republic – 7,672.00 (14.07%)
Spain Market Telefonica Spain • Fixed telephony accesses = 13,663.90 • Internet and data accesses = 5,823.0 • Mobile accesses = 23,879,10 • Pay TV = 747.80 • Total accesses = 47,117.90
Total Accesses by Market * Total Accesses in Thousands
Telefonica/Vivo Deal • Jul 28 – Bought Portugal Telecom’s 60% stake in Vivo, Brazil’s largest wireless company, for EUR 7.5B, adding to its’ 40% stake before the deal • Strengthened position in the booming Brazilian market EPS and FCF accretive from 2010: +€3.5bn impact in net income in 2010 derived from the business combination achieved in stages in Vivo • €2.3/2.7bn1 from operating synergies and benefits from Telefónica’s management model • Additional €1/1.5bn1 savings from financial and tax synergies (so total of about 4bn saved due to synergies) • Limited Impact on leverage (0.3x)
Telefonica/Vivo Revenues • First half of 2010: Brazil TEF Revenues – 4.877B EUR, of which 1.825B EUR from Vivo and the rest from Telesp. • Second half of 2010 est. - From the acquisition and assuming 5% growth, expected second half revenues – 7.67B EUR, of which 4.62 B EUR from Vivo.
Some stats on Vivo • Vivo reported 56.0 million accesses at the end of June 2010, increasing its customer base by 19.6% year-on-year. • First-half wireless data revenue increased 70.2% year-on-year, 81.5% in the second quarter. Data revenues now account for 17.4% of service revenues (+6.3 percentage points year-on-year)
EWZ Vs. TEF Vivo Acquisition