Newly elected Chorus director Mark Cross sees an opportunity for the telecommunications network operator's share price to be re-rated by the market because of ballooning demand for online services driving the country's data usage.
Cross, a former investment banker who's also chair of institutional investor Milford Asset Management, made his case for election to the Chorus board at today's annual meeting in Wellington. Among the services driving data use are ultra high-definition television, internet of things, and autonomous vehicles, supported by Chorus's infrastructure.
"Through professional and personal interest I'm a keen follower of these trends and see Chorus at the heart of those," he said. "The opportunities are also clearly there to drive a re-rating by the market of Chorus as a stable regulated company."
Chorus's share price was punished by investors in 2013, falling as low as $1.275 as the government struggled with a legislative response to telecommunications commissioner Stephen Gale's proposal to regulate price cuts. Through a protracted process, the commission backed away from enforcing as deep a cut as first proposed, and the shares have recovered, recently trading at $3.66, compared to its $2.94 listing price when it was carved out of Telecom Corp in 2011.
The stock is trading at a price-to-earnings ratio of 19 times with a dividend yield of 5.47 per cent and is rated an average 'hold' by five analysts surveyed by Reuters with a median price target of $4.37. The benchmark S&P/NZX 50 index is trading at a PE ratio of 14.69 times and a dividend yield of 5.11 per cent.
Director Keith Turner also put himself up for re-election after being convinced to stay on for another year, saying he accepted it was in the company's best interests for him to stay for the time being to allow an orderly succession.
Turner said the network operator faced a lot of decisions "just around the corner" on the second phases of the government-sponsored ultrafast broadband and rural broadband schemes "just around the corner", which would create more work for Chorus if they succeeded.
A new regulatory framework for wholesale telecommunications prices using a building block model based on other utility sectors will set a global precedent when it's in place, he said.
"That's crucial to Chorus's future - especially to shareholders to earn a fair return on your investment," Turner said. "We still have some way to go in that discussion and debate."
Chorus director Clayton Wakefield stepped down from the board at the end of the meeting, while Anne Urlwin also sought re-election. The board also sought to increase their pool of directors fees by $49,500 to $1.145 million, a 4.5 per cent increase, which chairman Patrick Strange said was consistent with two independent reports commissioned on director remuneration.
Shareholders passed all of the resolutions.