1) capex still 15% of revenue, they seem to indicate that they will still hit 11-13% not sure if they will be an annualized rate by year end or if they are saying 13% for 2013. This is slip from what they have said for the last 2 years in my opinion, they indicated by 2013 that the capex would be down and it is not - very bad
2) cash interest is down 25% YOY, I am hoping the QA session cleared up if this was a blip (remember this is cash interest and interest exp is up 8% YOY) or if this is the new run rate - they did a lot of refinancing which should have a decent impact. This would be a big positive for the cash flow
3) payout ratio is 60% for Q1 - this is very good and comparable YOY (remember Q1-12 had $120M tax refund
4) Looking at roll forward for 2013 I think these would be very conservative:
OBITDA of 2,300 (YOY decrease of 2%)
capex of 900 (15% of revenue vs mgt est of 13% but in line with Q1)
interest 600 (10% improve over 2012 vs 25% improve in Q1)
= AFCF 800
div payout 593
= payout ratio 74%
pay down debt 200 million
5) Debt due in 2013 is covered by undrawn note as is 2016 debt so by 2017, they will have built up about $1B of cash to pay down debt coming due in 2017 (or to support refinancing)
6) if they are correct, and the capex rate drops to 13% that drops the payout ratio to 64% and creates another $100 million to pay down debt - if they can push capex down by 13% the dividend is very safe with $300 million in cash to pay down debt and improve credit ratings
What management needs to do is give projections for 2013, not a bunch of % etc.
All in all this was a decent quarter but the capex hanging at 15% is killing the stock
Can you explain why the capex is so significant for WIN? Even at a constant return of dividends return only, and no growth makes it very attractice at present price
Are you implying that the company should restrain the dividend outflow and invest more of it back in to the business?
the capex is important because if it needs to be 15% of revenues to sustain their biz then they probably can't afford to pay the dividend long-term. Take a look at the mgt presentation - they have a lot of debt coming due starting in 2017 their credit rating has recently been downgraded so the problem is, as that debt comes due what terms can they get to refinance or will they have to cut the dividend to get it refinanced. So this is not an issue for the next few dividends but the market looks a lot more forward than some of the other bulls on the board seem to think, the price action today is not hedge fund manipulation - it is a lack of clarity from management about what capex needs to be and the fact that they have been indicating for 2 years it will drop to 13% in 13 and in the 1st qtr it stayed stuck at 15%.