Chorus Ltd

L1 Capital Long Short Fund has updated its investment thesis on Chorus Ltd, emphasizing the company's dominant position in New Zealand’s high-speed broadband infrastructure. Having completed the decade-long, capital-intensive roll-out of its fibre network, Chorus is now positioned for strong future cash flow generation. While the current FY24E dividend yield of approximately 6% is attractive, L1 Capital Long Short Fund is particularly excited about the potential for dividends to accelerate in FY25 and FY26. The Fund continues to hold Chorus because it believes the company is well-placed to deliver increasing shareholder returns as the benefits of its infrastructure investment begin to materialize, driving both growth and dividend acceleration in the coming years.

L1 Capital Long Short Fund continues to hold its position in Chorus Ltd, which saw a share price increase in August following the company’s full-year results. Chorus reported earnings at the top end of its guidance, with FY25 growth expectations despite limited benefit from recent price increases. The company’s revised strategy focuses on expanding fibre penetration and exiting copper by 2030. A key development was the update to Chorus’s capital management framework, which now commits to paying 70-90% of adjusted free cash flow as dividends, up from 60-80%. This increase in dividends, expected to reach 57.5 cents per share in FY25, is well above consensus and marks a significant shift for the company as it transitions from a capital-intensive fibre rollout phase to a cash-generative network operator. L1 Capital believes the market has yet to fully appreciate this inflection point in Chorus’s business, as well as its unique position as a regulated, essential digital infrastructure asset. This transition is expected to enhance the company's long-term value.

L1 Capital Long Short Fund continues to hold its position in Chorus, following a positive share price movement after the company released its FY24 results and updated corporate strategy. The company’s earnings for FY24 came in at the top end of guidance and were in line with market expectations, with FY25 guidance indicating continued growth. Chorus’s revised strategy focuses on increasing fibre penetration and phasing out copper by 2030, providing clear long-term goals. However, the most significant development was the update to its capital management framework, which now targets dividends of 70-90% of adjusted free cash flow, up from the previous 60-80%. This change signals a shift in Chorus’s business as it moves beyond its capital-intensive fibre rollout phase to become a highly cash-generative network operator. The company has also increased its FY25 dividend guidance to 57.5 cents per share, which exceeds consensus expectations and represents a 21% increase over FY24. L1 Capital believes this inflection point, which marks the company’s transition to a more sustainable cash-generating model, remains underappreciated by the market. The fund continues to view Chorus as a unique and scarce investment opportunity in the regulated, essential digital infrastructure sector.