SBAC Gets High Marks and Takes a Big Step in Africa


According to Jennifer Fritzsche, Senior Analyst at Wells Fargo Securities, SBAC reported solid Q2 2019 results that beat her estimates across the board and were reflective of an active leasing environment in the U.S. and abroad. 

“The company highlighted its S/TMUS overlap exposure as 12.9 percent of cash site leasing on a combined basis (6.4 percent Sprint / 6.5 percent T-Mobile),” Fritzsche said “but does not anticipate any churn to materialize in 2H 2019 given the timing lag between leasing/decommissioning and the impact being reflected in financials. DISH continued to be active in Q2 and management noted that activity conducted to date is bound by its lease terms.”

Fritzsche said she was impressed by SBA’s strong leasing in its Brazil market, but said the big announcement was that the company was exercising its option to consolidate a 900-site joint venture in South Africa and is immediately accretive to AFFO/share. SBAC declared its first ever cash dividend payable in Q3 and authorized another $1.0B share buyback. 

“We view the dividend positively as it should help it appeal to a broader dedicated REIT shareholder base,” she said. “The dividend is estimated to grow 20 percent CAGR, allows for a more efficient use of its NOLs, and reduces the distribution that would have been required in 2021. That said, given the solid ongoing operations, we believe the premium to its peers on an EV/EBITDA and P/AFFO basis is warranted and remain on the sidelines with a Market Perform rating,” Fritzsche said. 

“A strong quarter” is how Robert Gutman, an analyst at Guggenheim, described SBA’s performance. Gutman said they raised a full year guidance reflecting (1) better than expected domestic organic performance, (2) the accretive acquisition of Atlas Tower South Africa, and (3) a slightly lowered FX headwind. 

“In addition, the company announced its first ever dividend payment at $0.37 per share in Q3,” Gutman said. “Last, management stated that it does not see any impact on NT expectations from the S/TMUS merger approval – or the proposed divestitures – and remains positive on longer-term network spending implications. Despite strong results, we maintain our NEUTRAL rating and $220 PT given the current market valuation,” he said.  Comments? Email Us.

July 31, 2019

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