Manitoba Telecom Services still destroying shareholder value

Jan 7th, 2011 – 2 Comments

When I see charts like this I always ask myself why risk my money on a stock that has done little for its shareholders? I still have not found an aswer to that question when it comes to MBT.

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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.

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Hi Lou,

I held MTS but luckily sold it at $35 after concern that a significant reduction in its dividend was close at hand. I couldn’t understand why the board of directors would continue to pay a dividend significantly greater than MTS earns. The funds for the payout must be adding debt which merely adds to their difficult situation. Please comment and or explain. Thank you.

Jim, Ottawa

Hi Jim,

Good on you for selling before you found  new lows with your hard earned money.I last posted on Manitoba Telecom Services Inc. (MBT TSX) on April 7, 2010 for Flo. At the time she wanted to know if MBT would see its way back to $42.00 in the next year  given than it was trading at $31.5o when she wrote. Unfortunately the stock continued the downtrend that has been in place for three years and has a lot of work to do if its going to stop the pain.

As to your question about the dividend, management in the telecommunications sector typically will do whatever they possibly can to maintain  their dividend for fear of spooking the street and trashing the stock. There have been a number of cases where companies strap on debt to maintain their dividend.

On December 30, 2010 Maher Yaghi, from Desjardin Securities, noted in a piece posted on that in his view there was a red flag on the shares of MBT. His analysis indicated that MBT was paying out 99% of its free cash flow to support its dividend and that there wasn’t any room for them to increase their distribution to common shareholders.

The charts will provide a better view of the risks and opportunities associated with MBT.

The three year chart tells the tale of betrayal that has been in place since 2007. There is a serious downtrend in place and every attempt to breakthrough has failed. In early May of 2010 the company reported lower Q1 earnings that saw the stock melt through support at $31.50 taking it to the August lows of $24.75.

The six month chart depicts the bounce off the lows to $30.00 but the resistance along the 200 day moving average is as hard as a steel beam. Currently MBT has to hold support at $28.00 if it has any hope of a recovery in the short term. 

When I see charts like this I always ask myself why risk my money on a stock that has done little for its shareholders? I still have not found an answer to that question.


Categories: Telecommunications
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