Fund Manager Summary
The fund managers believe that the outlook for Chorus Ltd presents a compelling opportunity for investors, particularly in light of its ownership and operation of the majority of New Zealand's high-speed broadband infrastructure. Following the completion of a decade-long fibre network roll-out, the company is positioned for growth. In their opinion, the current consensus FY24E dividend yield of approximately 6% is attractive, but the potential for accelerated dividends in FY25 and FY26 is what truly excites them. This combination of stable income and growth prospects makes Chorus an appealing investment choice.
Source: Trading View
Commentary From The Managers
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L1 Capital
30 June 2025
$7.81
Summary
- Chorus is the incumbent fixed line telecommunications network owner and operator in New Zealand, with a fibre-to-the-home (FTTH) network passing 1.5m premises and 1.1m connections.
- Chorus operates on a wholesale-only, open-access basis and is progressively decommissioning its legacy copper network.
- Since its de-merger from Spark in 2011, Chorus has focused on building the Ultra Fast Broadband (UFB) network, securing rights to approximately 75% of the UFB footprint.
- Investment highlights include a regulated business model that provides earnings certainty and clarity on returns, protecting real returns amid varying macro conditions.
- As capital expenditure winds down, Chorus is transitioning from a 'network builder' to a 'network operator', leading to an improvement in free cash flow and increased shareholder returns.
- Fibre adoption rates are expected to improve, with management targeting an increase from 72% to 80% by the end of the decade through various strategies.
- Business simplification is ongoing as the company seeks operational improvements amid the winding down of network construction and copper decommissioning.
- Chorus has defensive characteristics, being an essential service provider with a strong regulatory model, offering earnings and cash flow certainty.
- Recent regulatory engagement by L1 Capital led to a positive outcome in Chorus's pricing model review by the Commerce Commission, improving the operating outlook.
- Active capital management engagement has resulted in Chorus announcing a 21% increase in its dividend for FY25 and adjusting its long-term payout ratio.
- The updated financial framework reflects a simplified corporate strategy focused on exiting copper and enhancing fibre penetration.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
L1 Capital
30 June 2025
$7.81
- Chorus is the incumbent fixed line telecommunications network owner and operator in New Zealand, with a fibre-to-the-home (FTTH) network passing 1.5m premises and 1.1m connections.
- Chorus operates on a wholesale-only, open-access basis and is progressively decommissioning its legacy copper network.
- Since its de-merger from Spark in 2011, Chorus has focused on building the Ultra Fast Broadband (UFB) network, securing rights to approximately 75% of the UFB footprint.
- Investment highlights include a regulated business model that provides earnings certainty and clarity on returns, protecting real returns amid varying macro conditions.
- As capital expenditure winds down, Chorus is transitioning from a 'network builder' to a 'network operator', leading to an improvement in free cash flow and increased shareholder returns.
- Fibre adoption rates are expected to improve, with management targeting an increase from 72% to 80% by the end of the decade through various strategies.
- Business simplification is ongoing as the company seeks operational improvements amid the winding down of network construction and copper decommissioning.
- Chorus has defensive characteristics, being an essential service provider with a strong regulatory model, offering earnings and cash flow certainty.
- Recent regulatory engagement by L1 Capital led to a positive outcome in Chorus's pricing model review by the Commerce Commission, improving the operating outlook.
- Active capital management engagement has resulted in Chorus announcing a 21% increase in its dividend for FY25 and adjusting its long-term payout ratio.
- The updated financial framework reflects a simplified corporate strategy focused on exiting copper and enhancing fibre penetration.
Summary
L1 Capital
30 Sept 2024
$7.95
- L1 Capital updates investment thesis on Chorus Ltd following a positive earnings release.
- Chorus shares rose by +9% after the announcement of FY24 earnings at the top end of guidance.
- Management provided an updated corporate strategy focusing on increasing fibre penetration and planning to exit copper by 2030.
- FY25 guidance indicates continued growth despite limited price rise benefits for part of the financial year.
- Key catalyst was an updated capital management framework, raising dividend payout expectations from 60-80% to 70-90% of adjusted free cash flow.
- Chorus anticipates a dividend of 57.5 cents per share for FY25, exceeding market consensus of 50 cents.
- This new dividend policy marks a significant inflection as Chorus transitions to a cash-generative network operator.
- L1 Capital believes the market underestimates this inflection point and the unique investment potential of Chorus as a scarce regulated digital infrastructure asset.
Summary
L1 Capital
31 Aug 2024
$7.90
- Chorus (Long +11%) shares rose in August following the company's full year results.
- Management presented an updated corporate strategy and capital management framework.
- FY24 earnings came in at the top end of company guidance and aligned with market expectations.
- FY25 guidance suggests continued growth, despite limited price rise impact.
- Chorus aims to increase fibre penetration and exit copper by 2030, setting clear targets.
- Updated capital management framework commits to dividends of 70-90% of adjusted free cash flow, a rise from 60-80%.
- Projected FY25 dividend of 57.5 cents per share exceeds consensus expectations of 50 cents, and is 21% above FY24's 47.5 cents.
- This shift in dividend policy marks a significant inflection point as Chorus transitions from a capital-intensive phase to a cash-generative operator.
- L1 Capital believes this transition and unique investment proposition of Chorus is currently under-appreciated by the market.
Summary
L1 Capital
31 Dec 2023
$7.30
- Chorus owns and operates the majority of NZ’s high-speed broadband infrastructure.
- The company has completed a decade-long roll-out of its fibre network at a significant capital cost.
- The current consensus FY24E dividend yield of ~6% is seen as attractive.
- L1 Capital is excited about the potential for dividends to accelerate in FY25 and FY26.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"With a robust fiber network finally in place, Chorus Ltd. could be on the brink of a dividend acceleration that may redefine its value. While the current yield is appealing, the real excitement lies in what FY25 and FY26 might unveil."
Last Updated: 30 Jun 2025
Query The Data
Frequently Asked Questions
Who is investing in Chorus Ltd (ASX:CNU)?
Fund managers including L1 Capital have invested in Chorus Ltd (ASX:CNU).
Why do fund managers invest in Chorus Ltd?
Fund managers are investing in Chorus Ltd due to its ownership of New Zealand's primary high-speed broadband infrastructure and the successful completion of its extensive fibre network rollout. With an attractive FY24E dividend yield of approximately 6%, there is strong potential for accelerated dividend growth in FY25 and FY26, making it an appealing investment opportunity.
What happened to Chorus Ltd (ASX:CNU)?
There have been no recent updates from fund managers regarding Chorus Ltd although fund managers including L1 Capital have previously commented.