Having recently spoken to several private tower companies, RF engineering firms and other companies in the wireless services space, Jennifer Fritzsche, Senior Analyst, Wells Fargo Securities, had a “slow your roll” moment.
“On the heels of very strong macro activity in 2Q,” Fritzsche said, “there was some voices of caution which highlighted some things to watch for in late 2019/early 2020. While we favor the resiliency of tower business, with the peer group’s EBITDA and AFFO multiples appreciating 6.5 turns and 6.8 turns, respectively, we struggle with valuation for the group at these levels,” she said.
Fritzsche said a consistent theme was that there is a big difference between “bookings” and “commencements.” As a reminder, the lag between bookings and commencements is ~6 months.
“Many of our contacts noted that 2018 was one of the best bookings years seen in the industry. Thus far in 2019, we get the sense that bookings levels are down vs. 2018 levels,” she said. Given the lag between bookings and commencements, she believes this could create a harder set up for domestic activity in early 2020… “especially knowing the tough comp sector will face from the strong 1H19,” Fritzsche said.
August 19, 2019