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Uniti Group Inc UNIT

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Stock XNAS Rating as of
$3.16 −0.03 (0.94%)
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As of Delayed Price Closed
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Uniti: Opacity and Uncertainty Surrounding Windstream Acquisition Outweigh Any Opportunity; $4 FVE

Matthew Dolgin

After placing the stock under review following the Windstream merger announcement, we are relaunching coverage of Uniti with a $4 fair value estimate. The big decline from our previous Uniti fair value estimate of $12 is a function of stand-alone Uniti’s fractional level of equity relative to debt, the loss of real estate investment trust, or REIT, status, comparable debt leverage given the cash and preferred equity portions of the deal, and absent planned cost savings. It also reflects uncertainty around Windstream, especially the managed services business.

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Price vs Fair Value

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UNIT is trading within a range we consider fairly valued.
Price
$3.16
Fair Value
$5.00
Uncertainty
Very High
1-Star Price
$8.00
5-Star Price
$5.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Completion of the merger with Windstream will reduce the significant financial risk and customer concentration Uniti has independently, while also diversifying the firm’s operations into the growing fiber broadband market.

Bears

Inability to complete the agreed-upon Windstream merger will leave Uniti in its currently very weak financial position, making insolvency a risk.

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Trading Information

Previous Close Price
$3.19
Day Range
$3.11–3.22
52-Week Range
$3.00–6.71
Bid/Ask
$3.16 / $3.20
Market Cap
$759.21 Mil
Volume/Avg
2.9 Mil / 2.8 Mil

Key Statistics

Price/Earnings (Normalized)
4.73
Price/Sales
0.68
Dividend Yield (Trailing)
18.99%
Dividend Yield (Forward)
18.99%
Total Yield
18.99%

Company Profile

Uniti is a REIT with about 140,000 route miles of fiber in the US, primarily in the Southeast. It has agreed to merge with Windstream, which will result in Uniti giving up its REIT status and adding a consumer telecom business line. Uniti’s business currently consists exclusively of fiber leasing to enterprises. Windstream currently leases the Uniti network and makes up the bulk of Uniti’s revenue and profits. The combined firm will own 217,000 route miles of fiber and pass 4.3 million households and 150,000 commercial buildings, mostly in less populated markets in the Southeast. The firm will continue to offer fiber access to enterprises, as Uniti currently does, but residential telecom services will become its largest revenue stream.
Sector
Real Estate
Industry
REIT - Specialty
Stock Style Box
Small Core
Total Number of Employees
813
Website
https://www.uniti.com

Competitors

Valuation

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Metric
UNIT
LUMN
VZ
Price/Earnings (Normalized)
 4.7325.438.65
Price/Book Value
 —2.601.81
Price/Sales
 0.680.091.27
Price/Cash Flow
 1.930.464.44
Price/Earnings
UNIT
LUMN
VZ

Financial Strength

Metric
UNIT
LUMN
VZ
Quick Ratio
 0.120.770.52
Current Ratio
 0.131.030.71
Interest Coverage
 0.68−8.333.72
Quick Ratio
UNIT
LUMN
VZ

Profitability

Metric
UNIT
LUMN
VZ
Return on Assets (Normalized)
 4.08%−0.98%4.66%
Return on Equity (Normalized)
 —−11.06%18.99%
Return on Invested Capital (Normalized)
 17.64%3.01%7.89%
Return on Assets
UNIT
LUMN
VZ
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