“SBA is, by far, the most attractive of the Big Three tower equities at current prices,” according to Nick Del Deo, analyst with MoffettNathanson. He cites the quality of their numbers as being the highest among the major towercos and an asset mix that is “the cleanest.”
“A higher share of its business stems from traditional domestic towers than its peers,” Del Deo said, adding SBA also has higher average escalators. “It doesn’t have fiber assets like Crown Castle, and its overseas tower portfolio mix skews towards more structurally attractive markets than American Tower’s does.”
Jennifer Fritzsche, Wells Fargo’s Managing Director of Equity Research reported SBAC had “a nice Q3 2018 beat and raised 2018 guidance.” She said SBAC is the first tower company to acknowledge that DISH signed leases waiting to be deployed. In addition, she cited management exploring non-macro tower revenue streams, including rooftop infrastructure, opportunities in edge computing, and indoor applications using CBRS and other solutions. “This is new message for them,” Fritzsche said. “SBAC reiterated its strategy of growing its portfolio by 5-10% annually and buying back shares with excess FCF while maintaining its net leverage target of 7.0-7.5x. Given higher leverage, slightly higher churn and valuation ( ~20.0x 2019E AFFO) we remain at Market Perform rating,” she said.
“Strong” is the word Amir Rozwadowski, analyst with Barclays, used to describe SBA’s Q3 and increased 2018 guidance, citing robust activity levels in the U.S. and international markets. “Multi-year initiatives continue amongst the Big 4 U.S. carriers,” he said. “Investors are now likely to focus attention towards SBA’s ability to drive another year of accelerated leasing growth, an outcome which seems more likely given carriers’ recent commentary around accelerating their multi-year initiatives,” Rozwadowski reported.
Estimates were ahead of projections, said a more muted Robert Gutman, analyst with Guggenheim. “Domestically, Y/Y growth was 7.0%/5.0% (gross/net) vs. 2Q’s 6.4%/4.7% (gross/net),” he said, “as the company is seeing solid contribution from all four major carriers and DISH. While the organic outlook remains unchanged, the increase reflects the net effect of a slightly higher FX headwind, more than offset by a greater contribution from service revs and a bundle of small items.” All that being said, he believes the company remains well positioned headed into 2019. Comments? Email us.
November 7, 2018