Cable Bahamas Limited

Cable Bahamas is my highest-conviction name on the exchange, and the thesis is about timing. For years the company has poured money into building an island-wide fiber network, and that spending has buried its earnings under depreciation and the cost of the preferred shares that funded it. That build-out is now essentially finished. As capital spending rolls off, depreciation deflates and, as the expensive preferred stack is refinanced and repaid, interest falls. Both drop straight through to profit. Even to a global investor charging the full Bahamas country risk premium, fair value is about $8.43 against a $3.78 price, roughly 123% of upside, and to a domestic investor more still. It is the one name in my coverage that is clearly cheap on both lenses.

I want to be precise about what this is and is not. This is not a story about a sudden operating breakout. EBITDA margin has moved only modestly, from about 37% to 40%. It is a story about the profit-and-loss normalizing after an investment cycle, with depreciation deflating back toward a maintenance level and interest expense falling as the capital structure is cleaned up. That is a quieter, more mechanical path to profitability, but it is a more reliable one.

IThe business

Cable Bahamas Limited (BISX: CAB) is transitioning from a legacy cable-television provider into a connectivity business built on high-speed fiber and mobile data. Two assets drive it. The first is ALIV, its mobile arm, which holds roughly 50% of the Bahamian mobile market and continues to gain share. The second is ALIVFibr, a fiber-to-the-home network into which the company has invested over $85M, and it now passes more than 103,000 Nassau households, about 95% coverage, and is extending into the family islands.

The ALIV ownership catch

One fact shapes everything. Cable Bahamas owns only 48.25% of ALIV, the very asset it is banking on for growth. The government of the Bahamas holds the other 51.75%. A valuation that credited Cable Bahamas with all of ALIV's value would overstate the equity, so the model values the whole enterprise and then carves out the government's minority share (roughly $77M) to reach the value that actually belongs to Cable Bahamas shareholders.

Why fiber is a moat

The fiber build is expensive to replicate, which is the point. It carries high fixed and low variable costs, so incremental customers are highly profitable. Pure fiber needs far less maintenance and power than the old copper plant, and because it runs on light rather than electricity over metal, with battery backup for grid outages, it is markedly more resilient to the hurricanes that periodically hit the islands. Higher-tier bundles, including faster speeds, smart-home security, and streaming, lift revenue per customer and make a bundled subscriber much harder to lose.

IIWhy the market is wrong

The market is pricing Cable Bahamas on its trailing losses. The thesis is that those losses are the tail end of an investment cycle, not the steady state, and that the profit-and-loss is about to normalize in a way the current price does not reflect.

1. The build-out is ending, and costs roll off with it. The fiber rollout finishes around mid-FY27. As it does, capital spending falls, depreciation declines back toward a maintenance level, marketing growth slows as the network shifts from rollout to retention, and network-operations costs normalize. Legacy programming costs also fall as cable-TV subscribers give way to broadband that carries no content fees.
2. The capital structure is being cleaned up. Cable Bahamas funded its build largely with preferred shares (over $330M, against roughly $42M of bank debt) rather than take on bank leverage it likely could not. It has been running a multi-year program to retire the older, more expensive preferred shares, which lowers the preferred and interest burden and lets EBIT growth finally reach the bottom line.
3. The honest version of the inflection. I am not claiming an operating miracle. EBITDA margin has risen only from about 37% to 40%. Most of the EBIT and net-income expansion is depreciation deflating after the capital-spending boom and interest falling as the preferred stack shrinks. That is accounting normalization more than an operating breakout, and it is worth saying plainly, but it is real, and it reaches profit all the same.

This is not a bet on a breakout. It is a bet that a company stops spending like it is building something and starts earning like it has built it.

IIIValuation

I value Cable Bahamas with a bottom-up discounted cash flow, and the discount rate is the single most important methodological choice, because the capital structure is unusual. More than half of Cable Bahamas' capital is mandatorily-redeemable preferred shares, which are carried as liabilities and rank ahead of the common equity. I price that preferred as the senior claim it is, at its roughly 8% coupon, and I relever the equity beta to reflect that the ordinary shares are a thin sliver, about 28% of the capital, sitting on top of a large senior stack. That gives a high equity beta, near 2.07, and a cost of equity around 18% globally. Blended across equity, debt, and preferred, the weighted-average cost of capital is about 11% globally, an honest figure rather than the mechanically depressed one a naive WACC would produce. I run it through two lenses, one that charges the full Bahamas country risk premium and one that charges none.

The two lenses share identical cash flows and a 2.0% terminal growth rate, differing only in the discount rate. At a global WACC of about 11.0%, built on a relevered equity beta of 2.07 and the full country risk premium, fair value is about $8.43, roughly 123% above the price. At the domestic WACC of about 9.4%, which carries no country premium, it is about $12.32, roughly 226% above. Both run after carving out the government's 51.75% share of the ALIV mobile venture, worth about $77M. The full model, with every assumption, is available to download.

What moves the value

Beyond the discount rate, the value hinges on two things, how quickly costs roll off as the build-out ends and how the ALIV minority is treated. Because Cable Bahamas owns under half of ALIV, the government's 51.75% share (roughly $77M) is carved out of enterprise value before reaching per-share equity, so faster profitability or a smaller carve-out would raise fair value, and the reverse would lower it. Terminal growth is set at 2.0%.

On multiples, Cable Bahamas trades around 5.5x EV/EBITDA, undemanding for an infrastructure asset with a fiber moat. The trailing price-to-earnings multiple is not meaningful, because the company is still crossing into profitability.

IVWhat could break it

1. The growth engine is only 48% owned. ALIV drives the story, but the government owns the majority. That caps how much of ALIV's upside accrues to Cable Bahamas shareholders and puts a political counterparty inside the most important asset.
2. The profitability turn is partly mechanical. If depreciation does not deflate as expected, or the preferred refinancing stalls, the path to sustained profit slows. The thesis leans on normalization, not on a step-change in operating margins.
3. A preferred-heavy, capital-intensive balance sheet. Over $330M of preferred shares sit ahead of common equity. Higher rates or a heavier-for-longer capital-spending tail would keep pressure on the bottom line and the dividend.
4. Country risk and liquidity. As with every BISX name, the valuation carries a full country risk premium and the stock trades in a thin local market.

VThe model