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Global Voice
May 17, 2007, 7:22 am
Filed under: companies analysis

Global Voice (SGX: H23)

As of 17 May 2007

EPS: -0.0017EUR/share

P/E ratio: N/A

Earnings Yield: N/A

52 Week High: 0.625

52 Week Low: 0.110

The One Minute Story

Global Voice owns and operates Europe’s highest capacity fiber network and provides mission critical communication infrastructure and services to large corporations, carriers, and service providers. Constructed at a cost in excess of 2 billion Euros, euNetworks all-fiber optic network uniquely combines long-haul inter-city network linking Europe’s largest economies, with high density ‘last-mile’ metropolitan fiber networks in 15 of Europe’s leading cities.

Financial Analysis (in Euros)

YEAR

2006

2005

2004

2003

2002

Book Value Per Share

0.048

0.048

 

 

 

Cash Per Share

 

 

 

 

 

Cash Flow Per Share

-0.002

0.000

 

 

 

Earnings Per Share

-0.002

-0.002

 

 

 

Dividend Per Share

0.000

0.000

 

 

 

Dividend Payout Ratio

0.000

0.000

 

 

 

Net Profit Margin

-16.7%

-31.9%

 

 

 

Return on Total Asset

-2.4%

-3.6%

 

 

 

Return on Equity

-3.448%

-4.565%

 

 

 

Current Ratio

0.9

0.8

 

 

 

Long Term Debt of Capitalisation

17.3%

 

 

 

Financially, Global Voice is crap. It does not have positive earnings, cash flow is negative and the current ratio is below 1. Let’s not talk about profit margins or ROE.

What is interesting is that it is sitting on a network of fibre optic cables which costs EUR 1 bn to build that is wired throughout the main cities of Europe, which includes Dublin, Amsterdam and London. Somehow the reflected non-current assets values “Property, plant and equipment” at EUR 151.255m. Upon further investigation, “Networks” are valued at EUR 117.911m. I wonder if its undervalued.

Clearly with such assets, a takeover is possible, especially if Europe experiences consolidation of the industry for use of fibre optic networks. Fibre optics networks are strategic assets might probably be important assets to other companies in the same industry or in the telecommunications sector.

The main problem is that I can’t seem to find any readings on the industry and competitive position of Global Voice. Hence the large degree of uncertainty over the competitive position of Global Voice.

Will demand for the use of fibre optics networks increase? Once again I have no excess to studies on the industry, but if general economic growth continues to happen in Europe, use of broadband, high-speed or private networks should increase.

Come to think of it, does it matter if Global Voice improves it’s profits and EPS? If it shoes disappointing results, share prices will probably drop and this might influence other companies to take over Global Voice on the cheap. If it shows improved profit margins, other companies might take note and this might also increase the chance of a takeover. Even if Global Voice isn’t taken over, the increased earnings might spur prices to greater heights. I don’t know if this line of thinking makes a lot of sense, but i think the main play here is that it is sitting on valuable assets that other companies might want to get their hands on. A pity that I can’t seem to find the proportion of fibre networks Global Voice owns in Europe.

I must admit that much of the jargon in the annual report regarding the various technical services and fibre-optic networks are Greek to me, and this is a potential tripup.

Why Buy

  • Asset-rich company
  • Possibility of takeover
  • The spreading of risk – they offer services to all kinds of customers from all kinds of industries. e.g. companies from all industries ranging from the media (Endemol BV) to service providers like Digiweb. In a way, Global Voice is leasing use of the networks out while providing data services.

Potential Problems

  • Reliance on European demand for fibre optic network use.
  • Invisible competition (to myself at least) from other companies

What to Look out For

  • Takeoever interest
  • Earnings spurt
  • What the sales team does given that there is an increased focus to find clients

Strategy

  • Buy it on the cheap and leave it for a long long time. Not expected to deliver any dividends or real capital gains until much later.

Disclaimer: The author bears no responsibility for any financial losses caused by reliance on the author’s views. Investors are advised to do their own research before making their investment decisions.

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