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The Q3 numbers, adjusted for the depreciation of the Belarusian ruble, lower equipment sales and the stamp for the Austrian master lease agreement with EuroTeleSites, were still impressive. We remain at Buy on the stock. Nore that that we have not yet modified Telekom Austria’s accounts to deducted the EuroTeleSites contribution meaning that our price target will need to be restated by €1.25.
Telekom Austria Telekom Austria AG
The towers spin-off of Telekom Austria is effective today, 22 September. Shareholders of Telekom Austria AG will receive 1 additional share in EuroTeleSites AG for every 4 Telekom Austria shares held. An amount equal to one quarter of the reference price of the EuroTeleSites shares will be deducted from the closing price of the Telekom Austria shares on the Official Market on the Vienna Stock Exchange on 21 September.
Q2 revenues were very solid, up by 7.5% yoy, while the EBITDA was also better than expected, up by 6.3% yoy despite higher workforce and electricity costs. The key point to follow in the coming months is the spin-off of the tower activities. The new Telekom Austria with an EV of €4bn (if we assume an EV of €3bn for A1’s towerco) is today valued at only 2.5 times its EBITDA. The group remains undervalued and we maintain our strong Buy.
Q1 revenues were better than expected, up by 7.8% yoy, while the EBITDA was more in line, up by only 1% yoy as workforce costs increased by 3% as well as electricity costs by 38% yoy. In our view, the group remains undervalued. Note that the listing of the spin-off of the mobile towers is planned in H2. This entity could be valued at €4bn (vs a current EV of €7bn for TKA). We remain at strong Buy on the stock.
A better than expected Q4 and a solid outlook for 2023. In our view, the group remains undervalued. The dividend yield currently stands at 4.65% but remember that the group could potentially offer more. While the two main shareholders don’t seem that demanding in terms of dividends, A1’s cash flow minus capex covers the current dividend by four times. Even after applying a 10% discount due to the presence in Belarus, the stock looks cheap.
A better-than-expected Q3 although the Austrian operations proved tougher than usual with the launch of summer promotions focusing on hardware and the surge in electricity costs. Belarus, whose performance was however very solid, will continue to concern the market as Belarus is supporting the Russian invasion of Ukraine by making its territory and airspace available, although the country itself remains unlikely to enter the war. We maintain our buy on the stock.
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