An eventful week

Last week Telefonica announced the launch of an offer for its German subsidiary, released its Q3 numbers and presented its guidance for 2024-26. Regarding TEF Deutschland, we believe that Telefonica has launched a very timely and good offer. The new strategic plan is not that surprising, but the future regular growth in FCF is promising. We believe the current dividend to be secure (it could even be increased from 2024). We maintain our opinion at buy on the stock.

Solid Q2 for the quadruple geoplay

Telefonica released a solid Q2 with the expected 3.3% revenue growth but a good EBITDA progression of 3.5% despite higher energy costs and personnel expenses. We are confident about the group’s objectives for 2023 and therefore believe the 2023 dividend to be secure. We even think it could be increased from 2024. Our target price is probably too ambitious in the short term and a price of €4.6 is more reasonable (implying a 6.5% dividend yield).

Cash flow should improve in 2023 despite the inflationary pressures on EBITDA

Telefonica released a mixed Q1 with a solid 4.9% yoy organic revenue growth but an EBITDA up by only 1.1% due to higher energy costs and personnel expenses. Capex was however down by 0.7% and EBITDA less Capex was therefore up by 2.1%. Cash flow should grow modestly in 2023 and we are thus comfortable with the dividend for 2023. We maintain our opinion at buy on the stock.

Solid Q3 and dividend confirmed

Telefonica released a solid Q3 with 3.8% yoy organic revenue growth and EBITDA up by 3.1% yoy. Telefonica is still a Spanish story, with high potential in the UK and Brazil, plus solid assets in Germany. The dividend yield is 8.5% despite a steady increase in FCF in the future. We maintain our strong Buy on the stock (which lost 25% in Sept-Oct and has recovered by 7.5% in the past week).

Telefonica no longer deserves to be discounted compared to its peers

A solid Q2 with a 5.2% yoy organic revenue growth and an EBITDA up by 3.4% despite increasing energy costs in Spain. Telefonica is still mostly a Spanish story, with high potential in the UK and Brazil, plus solid assets in Germany. The dividend yield is 6.8% despite a steady increase in FCF in the future. We maintain our Buy. However, in the short term, the recent rotation toward quality growth stocks at the expense of telcos is likely to continue.

A solid and reassuring start to the year

Organic Q1 revenue growth was in line with expectations at 3.2% yoy, while EBITDA was up by only 2.1% yoy and lfl due to a significant increase in the cost of energy and the higher growth in lower margin revenue in Spain. EBITDA less capex was however good, up by 6.4% yoy due to a 4.9% decline in capex. The dividend yield is 6.45%, above the 4% for the sector best in class: we maintain our Buy.

Strong assets unfairly valued

Q3 was globally in line with expectations. Things are still tough in Spain but Germany is a very strong asset while Brazil and the UK are deploying fibre networks which should bear juicy fruits in the future. Hispam operates as an autonomous company which could soon be sold as a whole or piecemeal. Our significant upside is commensurate with the incredibly low levels reached one year ago. The stock has partly recovered but is still 35% under its pre-COVID-19 levels.

A new group is taking shape

The Q2 numbers are slightly better than expected. Telefonica has also upgraded its outlook for 2021. The dividend cut of last year, the recent sale of its telecommunications towers division in Europe and in Latin America for €7.7bn to American Tower, the merger with Virgin in the UK, the reduction in net debt and a quite correct H1 performance should indeed help restore market confidence. We maintain our opinion at Buy on the stock.

A reassuring Q4 and a 25% dividend cut

Q4 numbers were in line with expectations and quite reassuring. Telefonica has, however, preferred to cut its dividend by 25% (at €0.3 vs €0.4 previously) to preserve its cash flow while its investments will remain substantial in the coming years. So after the recent sale of its telecommunications towers division in Europe and in Latin America for €7.7bn to American Tower, this cautious cut could indeed help restore market confidence. We maintain our opinion at Buy on the stock.

How can one resist the sirens' call at such a price

Telefonica announced this morning that its subsidiary Telxius has signed an agreement with American Tower for the sale of its towers division in Europe for €7.7bn. It’s indeed an impressive price and TEF succumbed logically to the sirens of American Tower to reduce its debt a little more. We maintain our opinion at Buy on the stock.

Will the descent into hell ever stop?

Telefónica remains on track to deliver its 2020 outlook of flat EBITDA-capex yoy in organic terms but… at constant currency. The Forex headwind is however a storm in Brazil (-30% yoy). The stock is trading at a 55% discount to its February level. The dividend yield is nearly 15% reflecting the market’s major concern about its sustainability. Even if the group ends up lowering its dividend due to this Forex storm… we maintain our Buy opinion.

Still a double penalty for Telefonica

A poor Q2 performance for Telefonica although this had been expected given, in particular, the double penalty linked to the South American currency weakness vs the Euro (in particular the Brazilain Real) during the pandemic. For 2020 Telefónica nonetheless remains on track to deliver a slightly negative to flat EBITDA-capex yoy in organic terms but… at constant currency. The key point thus remains that the 2020 dividend is confirmed at €0.40.

A dividend confirmed and a good deal with Liberty-Global in the UK

The Q1 is in line with our expectations. Telefonica’s revenues could decrease by 5% in 2020, exceeding the top range of our own estimates of the COVID-19 impact on a telco’s account but this is due to the recent steep decline of South American currencies. As capex should decline like EBITDA, cash flows are not in danger and the group confirmed its dividends. The creation of a JV bringing together Virgin and O2 is strategically and fundamentally a good deal.

A new era for the company?

Telefonica has approved a 5-point plan which is supposed to mark a new era for the company. The key point seems the focus on the four markets which represent today 80% of Telefonica’s business and where the group is a solid leader. In parallel, the operational spin-off of Hispanoamerica seems to show the group’s willingness to disengage at term from these activities. It’s a very interesting perspective on the long term. We maintain our Strong Buy on the stock.

Management was right to give a cautious guidance for 2019

Nothing extraordinary about the Q2 release. Q2 revenues were up by 3.7% yoy and lfl, exactly like in Q1, while the adjusted EBITDA has increased in parallel by 1.6%, a number still a little bit weak compared to the revenue growth. It seems that management was indeed quite right to give a cautious guidance for 2019 with both revenue and EBITDA growth of around 2% (and a dividend unchanged).

CyanConnode (CYAN LN) - FY24 update: revenue materially ahead

CyanConnode exceeded FY24 revenue expectations and has high visibility into FY25, supported by strong deliveries and a growing backlog respectively.

CyanConnode (CYAN LN) - The smart choice

CyanConnode provides end-to-end communications platforms that connect Internet of Things (IoT) devices such as smart meters to a utility's billing system. The company is a global player and a market leader in India, where a new government scheme, as set out below, has mandated the procurement of 250m meters by March 2025, a significant market opportunity for CyanConnode.

CyanConnode (CYAN LN) - Large Letter of Award for Omnimesh Cellular Modules

CyanConnode has received a large Letter of Award (LOA) for Omnimesh Cellular Modules (CNICs) from a Thai customer.

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Morning Note – 21 December 2023

Hybridan Small Cap Feast - 18 Mar 24

18th March 2024 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment object

CyanConnode (CYAN LN) - FY23 results: Solid outlook

Revenue grew 23% in FY23 with limited contribution from Indian RDSS contracts

PROGRESSIVE: Gamma Communications: More happy returns

Gamma’s results for the year ended 31 December are in line with the expectations confirmed in the January trading update. Revenue of £521.7m is 8% ahead of FY22, with gross profit at £267.2m showing the same progress. Adjusted EBITDA grew by 9% and PBT by 10%, although the impact of higher tax rates was seen in the 5% increase in adjusted EPS. Cash generation was strong once again, with 108% adjusted cash conversion. Year-end cash of £134.8m is £42.3m above the year before, even after the £30.5m

MTI Wireless Edge+ (MWE, House Stock at 46p) - US$1.2m antenna contract win

The Joy of Techs - Cavendish Technology quarterly sector note

£23.3bn in enterprise value has been returned to AIM technology shareholders over the past six years in the form of 51 public to private takeouts, including 10 in 2023 alone with the takeovers of Smoove* and Tribal announced in early October. With UK valuations appearing cheap and looking more attractive to potential acquirers, we take a moment to reflect on the trends of corporate and private equity bidders targeting AIM-listed technology companies going back to 2017, through the uncertainties

Cyanconnode (CYAN): Smart meter breadth and depth

CyanConnode has steadily been making progress in India, where the national smart meter programme has been gathering pace. In July 2022, the company crossed the one million mark for meters connected to its RF network across nine Indian states. This is the aggregate RF device number in India connected since 2014 and represents market share of 22%. The latest update from the company states an order book of 2.6m RF nodes for India. Performance of smart meters is a critical aspect of the Indian progr

Hybridan Small Cap Feast - 10 Oct 23

10th October 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment obje

CyanConnode (CYAN LN) - FY23 update

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CyanConnode (CYAN LN) - Contract win

CyanConnode has announced another contract win for 300k modules.

CyanConnode (CYAN LN) - Investing in growth

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