Chorus Limited

( ASX:CNU ) - ASX200 Communication Services


Why Chorus Limited Looks Undervalued

One slightly unusual holding in our domestic funds is Chorus Limited (CNU), New Zealand’s largest owner of telecommunications networks. CNU has had a bumpy ride this last year, but we think the market has marked it down too far due to regulatory uncertainty.  If we are right, then the company should re-rate.

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Light At The End Of The Tunnel For Chorus?

Chorus Limited (CNU) was created in 2001 when Telecom NZ split into two parts – Chorus, which owns the fixed network, and Spark, which owns the retail business and the mobile network. Telecom NZ was the first incumbent telco in the world to volunteer for such a structural separation, and in doing so positioned Chorus to participate in the build of the ultrafast broadband project (UFB) – NZ’s version of the NBN.

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Chorus Sings The Blues

Chorus, a telecoms operator split off from Telecom NZ in 2011, is a regulated monopoly that owns and operates copper cables in New Zealand. It generates revenue by leasing the copper cables to phone and broadband providers at prices determined by regulators. At a price-to-earnings ratio of just four and an implied yield of over 10%, the numbers suggest Chorus is cheap. As ever, there is more to the story.

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