A real mix of snippets this week, kicking off with the rise of the Towerco Infra sub asset class
Towercos as an asset class
Everyone loves infrastructure as an asset class. As I write, there are probably at least a dozen specialist infra funds looking to raise capital on the London market at the moment – including Gresham House Energy Storage where I am a NED!
At the moment the hottest segment is the renewables and energy efficiency segment but on paper, I think the digital infrastructure segment is equally interesting. I’ll be looking at the broad digital infra segment in a future FT piece but for now, contemplate the inexorable rise of the TowerCo. These are focused businesses (and REITs in the USA) who only invest in mobile phone towers (as well as some broadcasting infrastructure). The monster imminent IPO – in Germany, in 2021 – is Vantage Towers which hosted a capital markets day earlier this week. It has 68,000 macro sites across 9 countries in Europe and boasts adjusted EBITDAL (?), for the core business of 523 million euros, which increases to 680 million euros once an Italian investment is included. To describe this as a high overhead business is something of an understatement with a post depreciation margin of 55%. But Vantage Towers will be joining a niche sector that seems to be getting ever hotter. In the table below I have listed the main listed Towercos I can track down. And boy, the returns have been hugely impressive! That said, valuations look a tad euphoric, but I suppose this is a classic growth infra story, with remarkably low volatility.
|Name||TIDM||Price||%chg 1m||%chg 6m||%chg 1y||%chg 5y|
|American Tower Corp||AMT||23836¢||-2.28||3.57||9.39||137|
|SBA Communications Corp||SBAC||29776¢||-2.89||4.94||23.7||189|
|Cellnex Telecom SA||CLNXE||5135¢||-2.86||1.72||35.5||247|
|Crown Castle International Corp||CCI||16802¢||2.16||10.2||22.7||93|
|Helios Towers PLC||HTWS||155p||-3.25||18.9||29.2|
|Name||Market Cap. (intraday) (m)||Monthly Vol||PE||Net gearing||Yield||Pre-tax profit (m)|
|American Tower Corp||$105,842.6||4.78||55.7||584.7||1.6||1932.5|
|SBA Communications Corp||$33,064.2||5.13||184.4||0.4||235.7|
|Cellnex Telecom SA||€ 24,853.60||6.27||94.7||0.1||-53.1|
|Crown Castle International Corp||$72,462.4||4.82||89.9||135.9||2.7||915|
|Helios Towers PLC||£1,550.00||10.9||10.6||356.2||-79.1|
End of the Great Stagnation?
Next up, I return to my idea that we could experience a rerun of the Roaring Twenties. US libertarian inclined economist, along with Larry Summers, has helped popularise the idea that we were stuck in a Great Stagnation. Around the time his cracking book The Great Stagnation came out in 2011, he predicted “that it was most likely to end within the next twenty years. We are not there yet, but that claim is no longer looking so absurd.”
He quotes a fun tweet from S.Qureshi.
– A working mRNA vaccine (first ever in humans!),
– Apple M1 chip,
– SpaceX rocket launch,
– Tons of cool companies IPO’ing and tons more getting started,
– V-shaped recovery
– Electric cars
– Crypto going mainstream
Tyoer adds, “One could add warp speed, affordable solar power, the eggplant, and distanced work to that list, the latter also implying significant rent declines and child care cost declines for many people. Note that the vaccine-driven recovery will measure as a rise in labor inputs, but in reality it will be pure TFP. In 2021 (but which quarter?), true TFP will be remarkably high, maybe the highest ever?”
You can see Tyler’s original blog note here : http://feedproxy.google.com/~r/marginalrevolution/feed/~3/mA4PWLtWdBo/is-the-great-stagnation-over.html
The Big Shorts
This week we’ve all luxuriated in a big short squeeze, as the bulls have run rampant – especially in the UK markets.
About time too!
But those bears haven’t gone away and we’re bound to have more grim economic news in the short term as the virus weaves its terrible magic. So, perhaps worth scrutinizing the table below from Granite Shares which shows the largest ten short positions in companies that are listed and trading on London Stock Exchange.
|Company||Percentage of stock held short||Number of funds shorting the stock|
|Premier Oil PLC||9.14%||3|
|Tullow Oil PLC||8.87%||6|
|Metro Bank PLC||7.46%||4|
|Sainsbury (J) PLC||6.95%||5|
|Rolls-Royce Holdings PLC||5.86%||6|
Source: London Stock Exchange, data as of 12 November 2020
Among the stocks tracked by GraniteShares ETPs, Vodafone Group is the 13th most shorted stock, with four fund managers holding short positions representing 4.43% of the outstanding stock.
That last point is interesting – presumably, Vodafone will make a small fortune from the Vantage Towers IPO? Yet the bears are still lurking.
For the record I am invested, in a small way, in both Vodafone and top shorted stock Premier Oil.
I also note with interest Rolls Royce on that list. My gut tells me that this is a recovery stock but with a deeply challenged business model.
This is what a super spreader event looks like…astonishing naivete!
I’m going to finish with quite the most remarkable Covid 19 snippet I have read in recent weeks.
It comes from a sensible article on the iNet economics website.
That article is called “To Save the Economy, Save People First” and its written by Phillip Alvelda, Thomas Ferguson, and John C. Mallery.
It’s mostly a sensible reminder that there isn’t really a trade-off between the virus, lockdowns, and economic recovery.
Government’s need to crack down on the virus with a combination of selective local lockdowns, social distancing, mask-wearing, massive testing and a localized approach to track and trace. All stuff that I have talked about on this blog.
But some governments just don’t get this stuff and persist with sticking their heads in the sand.
Top of that list is South Dakota, in the USA, which seems to have allowed a number of super spreader events to sow carnage and chaos throughout the Mid West.
Read and weep !
The original article is online here : https://www.ineteconomics.org/perspectives/blog/to-save-the-economy-save-people-first
“South Dakota, however, may just take the crown for worst pandemic governance in the U.S. Despite the growing national pandemic, state officials decided to host a 7,500+ person event at Mt. Rushmore on the 3rd of June, complete with fireworks and attendees from all over the nation. This event, in retrospect, proved to be exactly the super-spreader event that local health officials feared…. The state then permitted a second, even more impactful week-long super-spreader event, the Sturgis Motorcycle Rally, which drew 365,979 people from all over the country. Not only did this further accelerate the exponential growth of COVID-19 in South Dakota, it seeded, and accelerated, the pandemic through dozens of neighboring states, likely becoming the primary trigger for the current surge across the mid, and mountain West. A Stanford study calculated the total cost of the event to include over 250,000 new COVID-19 cases across the U.S., over 700 deaths, and a staggering healthcare total expense of over $12.2 billion. …
“Though the exponential COVID-19 growth accelerated with each trigger, South Dakota leadership resisted taking abatement measures seriously until their hospitals were overwhelmed. And note that even city-posted resolutions at the end of October were sufficient to slow and stabilize the then current prevalence levels of the virus. But again, this minor action, without a mandate, could have saved hundreds of lives and billions of dollars had it been enacted in a timely fashion in June. At this point, it is no longer sufficient to suppress the virus and stop the health and economic damage. South Dakota will be forced to close large parts of its economy to recover.”