Quite a solid and better than expected set of results for Orange Belgium in Q4 with revenues and EBITDA up respectively by 4.8% yoy and 5.5%.
As for 2020, the group expects low-single digit revenue growth while the EBITDAaL should stand between €310m and €330m (vs. €300m in 2019). It will propose a dividend of €0.6 for 2019, up by 20% yoy. And we believe it could propose €0.7 in one year. We maintain our Add on the stock.
Orange Belgium is transitioning from a mobile-only operator into a high-quality convergent operator (relying on the new cable wholesale regulation). Excluding the impact from the loss of Telenet MVNO revenues, the adjusted EBITDA would have shown a 14% improvement as efficiency measures take hold. We believe the group should regain an EBITDA margin of 25% in the coming years and we remain at Add on the stock with a 10% upside.
The group has released its Q4 numbers: reported revenues down by 1.3% yoy (vs +1.5% in the first 9m) and reported EBITDA down by 24.9% yoy but Q4 16 included a positive impact of the Walloon tax agreement of €15.5m (excluding this EBITDA would have decreased by 1.8% (but vs a 1.5% increase in the first 9m)).
As for 2018, the group expects its total service revenues to grow in 2018 for the third year in a row but aims at an adjusted EBITDA between €280m and €300m. This takes into account the loss of close to €30m of MVNO revenues (from Telenet) and the final EBITDA impact of EU roaming regulation of €17m.
The dividend proposed for 2017 and paid in 2018 will be only €0.5 for 2017 (exactly like in the previous year): quite logical given the new outlook but a little bit lower than the €0.55 we had anticipated.
Q3 revenues increased by 1.7% yoy (as in H1). This is quite a good performance to be achieved despite the impact of the regulatory implementation of Roam-Like-at-Home (as of 15 June 2017, retail roaming within the EU has to be offered at domestic retail prices). Excluding this impact of c.€15m, the global revenues would have increased by 6.5% yoy (and service revenues by 8.2%!): the rapid adoption of 4G data usage and the increase in both the postpaid customer base and ARPU contributed substantially to this positive development.
The adjusted EBITDA has, however, decreased by 9.9% yoy but excluding the impact of the regulatory EU roaming it would have increased by 3.3% yoy (note the reported EBITDA has grown by 2.9% due to a non-recurrent change in provisions).
The group has reiterated its guidance for 2017: growth in total service revenues and an EBITDA between €290m and €310m. As a reminder, this guidance, with a realistic chance of being reached, was extremely ambitious especially taking into account the €32m adverse impact of the EU Roaming Regulation in 2017 (of which €13m in H1 and €11.5m in Q3).
Q2 revenues increased by a solid 3.5% yoy growth (they were only nearly stable in Q1). In Q2, Orange Belgium generated service revenues of €279.5m, a very good increase of 4.3% yoy (they were flat in Q1): the rapid adoption of 4G data usage and the increase in both the postpaid customer base and ARPU contributed substantially to this positive development and fully offset the negative impact of the EU Roaming Regulation (service revenues should have grown by 7.5% excluding it!).
Like in Q1, EBITDA has grown lfl by a very solid 12.9% yoy (excluding the Wallon pylon tax) thanks to a sustained focus on cost optimisation and despite being impacted by the reduction in roaming prices in Europe (it would have grown by 19% excluding it!). For the anecdote, note the yoy comparison basis for H1 was not impacted by the Walloon pylon tax, given that the Walloon pylon tax provision for the full year 2016 booked in Q1 16 was balanced by the reversal of the Walloon pylon tax provision for the full year 2015 in Q2 16. But the comparison base for the adjusted EBITDA in Q2 17 was, however, negatively impacted by the reversal of the Walloon pylon tax provision for 2015, booked in Q2 16.
The group has reiterated its guidance for 2017: growth in total service revenues and an EBITDA between €290m and €310m. As a reminder, this guidance is strongly ambitious especially taking into account the €32m adverse impact of the EU Roaming Regulation in 2017 (of which €13m in H1).
Q1 revenues were nearly stable yoy (-0.7%) but the mobile equipment sales (representing a little less than 10% of the global turnover) were down by 13% with the reduction in the number of subsidised devices and also a different launch date of some popular models. In Q1, Orange Belgium generated service revenues of €274m, a very correct increase of 0.6% compared with the same period last year (i.e. +2.6% excluding the EU Roaming Regulation): the rapid adoption of 4G data usage and the increase in both the postpaid customer base and ARPU contributed substantially to this positive development and fully offset the negative impact of the EU Roaming Regulation.
EBITDA increased by 3.6% yoy (excluding the 2016 Walloon pylon tax provision of €15.8m booked in Q1 16) to €72.2m as a result of both the positive trend in the top-line and its sustained focus on cost optimisation. Note also the reduction of roaming prices in Europe had an adverse impact on the EBITDA of €5.3m in Q1. Excluding this effect and despite the higher cable wholesale costs related to the Internet and TV offering, EBITDA would have increased by an impressive 12.2% yoy.
The group has reiterated its guidance for 2017: growth in total service revenues and an EBITDA between €290m and €310m. As a reminder, this guidance shows a strong ambition especially taking into account the €32m adverse impact of the EU Roaming Regulation in 2017.
H1 revenues were stable yoy (+0.3%) but the mobile equipment sales (representing a little less than 10% of the global turnover) were down by 11%, with the decline in basic mobile phones sold and a joint offer at the high end. In H1, Orange Belgium generated mobile service revenues of €504.5m, a solid increase of 1.9% compared with the same period last year (i.e. +3.2% excluding the EU Roaming Regulation): the rapid adoption of 4G data usage and the increase in both the postpaid customer base and ARPU contributed substantially to this positive development and fully offset the negative impact of the new Roaming Regulation (operators should allow their customers to use the traffic units included in their national subscriptions also in Europe, taking a small surcharge on top of the national prices).
Mobistar’s revenues amounted to €1.235bn in 2015, a decline of 1.1 % yoy. However, the turnover in Q4 amounted to €322.6m, an increase of 2.3 % yoy.
In 2015, Mobistar achieved a restated EBITDA of €276m, representing an increase of 0.4 % compared to 2014. The restated EBITDA in Q4 2015 amounted to only €47.9m, compared to €57.2m in the same period last year. However, it should be noted that the company adopted a prudent approach to the pylon tax with an additional provision of €10m in Q4 for 2014 and 2015, triggered by a rectification notice received at the end of December 2015 from the Walloon administration. Excluding this additional Walloon pylon tax provision, which remains heavily contested by Mobistar and the other mobile operators, Mobistar would have realized Q4 EBITDA of €57.9m.
Note that Mobistar is now ready for the launch of its convergent offers. To support its strategic ambitions, Mobistar is going to adopt the Orange brand in Belgium.
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CAP-XX Ltd* (CPX.L, 3.1p/£10.1m) | Gfinity plc* (GFIN.L, 1.675p/£12.0m) | MTI Wireless Edge Ltd* (MWE.L, 38.5p/£33.8m) | Newmark Security plc* (NWT.L, 1.05p/£4.9m) | Mirada plc* (MIRA.L, 95.0p/£8.5m)
Companies: CPX GFIN MWE NWT MIRA
EVR partners with Live Nation for virtual festival
FY 2019 was, as expected, a strong year for Gamma in financial terms with growth in Adjusted EBITDA of 31% a touch higher than we were expecting. Notably, that was achieved in a period where management has been pursuing its updated strategy which included investing in future growth and spending time assessing and undertaking acquisitions. The Group delivered well on its strategic aims during the year and it has announced further acquisitions in 2020. Gamma retains a strong balance sheet and we expect to see more deals in the future. It saw strong growth in the UK while its Dutch businesses were integrated and DX Groep saw a pick-up in H2. The near term business outlook is somewhat overshadowed by Covid-19 and we exercise a degree of conservatism as we upgrade our estimates to reflect the FY 2019 performance and the recent acquisitions. Nonetheless, the combination of organic and acquired growth produces a 5% upgrade in Adj. EBITDA for the current year which anticipates 15% growth on FY 2019’s strong number.
Companies: Gamma Communications
Panoro Energy (PEN NO)C: Initiating coverage | 88 Energy (88E LN/AU): Acquisition in Alaska | BP (BP LN): Transaction in Alaska with Hilcorp renegotiated | Columbus Energy Resources (CERP LN): Oil discovery in Trinidad | Premier Oil (PMO LN) and Rockhopper Exploration (RKH LN): Sea Lion farm out (Falklands) exclusivity period extended | BP (BP LN): 1Q20 results | Equinor (EQNR NO): Dry hole in Norway | Getech (GTC LN): Business update | Hurricane Energy (HUR LN): Business update in the UK North Sea |IGas Energy (IGAS LN): Shutting some production in the UK | Lundin Energy (LUP SS): 1Q20 results | OKEA (OKEA NO): 1Q20 update in Norway | OMV (OMV AG): 1Q results | Premier Oil (PMO LN): Court approves schemes of arrangement | Royal Dutch Shell (RDSA/B LN): 1Q20 results and dividend reduction | RockRose Energy (RRE LN): Operational update in the UK | UK Oil & Gas (UKOG LN): £1.275 mm equity raise | Caspian Sunrise (CASP LN): Operating update in Kazakhstan | Exillon Energy (EXI LN): February and March production in Russia | Nostrum Oil & Gas (NOG LN): 1Q20 update in Kazakhstan | PetroNeft (PTR LN): Operations update | Genel Energy (GENL LN): Update in Kurdistan – While negotiations are ongoing the KRG will not exercise the notice of an intention to terminate the Bina Bawi PSC | ShaMaran Petroleum (SNM CN): Business update in Kurdistan | Tethys Oil (TETY SS): Production reduction in Oman | Total (FP FP): Dry hole in Lebanon | Aminex (AEX LN) and Solo Oil (SOLO LN): Licence extension in Tanzania | Far Limited (FAR AU): Update in Senegal | Lekoil (LEK LN): Final payment with Nigerian partner rescheduled | Orca Exploration (ORC.A/B CN): FY19 results | Savannah Energy (SAVE LN): Financial and operating update in Nigeria | San Leon Energy (SLE LN): Special dividend | Seplat Petroleum (SEPL LN): 1Q20 results
Companies: 88E AEX PEN BP/ CASP CERP EQNR EXI FAR TTA HUR GENL GTC IGAS LEK LUPE NOG OKEA OMV ORC.B PMO PTR RKH RDSA RRE SAVE SLE SEPL SNM TETY SOLO UKOG
Quite a good Q4 supported by improving commercial momentum in Europe. The annual EBITDA grew eventually by 2.6% yoy reflecting the cost programme’s success.
The €0.09 dividend is maintained.
Vodafone is more highly indebted after its deal with Liberty-Global, but its dividend (cut last year) seems now more in harmony with its balance sheet. Besides, the monetisation of its infrastructure is continuing. Given therefore the slight growth Vodafone should offer in the coming years, we maintain our Buy recommendation on the stock.
Companies: Vodafone Group
MTI Wireless Edge Ltd* (MWE.L, 36.5p/£32.1m) | Brave Bison plc* (BBSN.L, 1.15p/£7.0m) | Starcom plc* (STAR.L, 1.0p/£3.5m)
Companies: MWE BBSN STAR
NextVR acquired by Apple for speculated US$100m
Mobile Streams has announced a gross subscription of £105k at 1.15p per shares to help fund product development and investment in growing the paying subscriber base. This looks likely to be applied to India where the business has been developing its business model and is now seeking to scale profitably.
Companies: Mobile Streams
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Oil posted the biggest weekly plunge since 2008, capping its most dramatic week in recent memory as major producers prepare to drench the market with supply just as the coronavirus crushes demand. But prices jumped following the close, after President Donald Trump said the U.S. would fill the nation's strategic reserve. Losses for the week totalled 23% after the collapse of talks between members of the OPEC+ group triggered the biggest crash in a generation. Instead of reaching a deal to cut output to mitigate the fallout from the virus, producers led by Saudi Arabia and Russia embarked on a war for market share and pledged to pump more.
Companies: TGL TXP VLU EGY GTE CNE DGOC ENQ SQZ UKOG TRIN TLW PHAR
The Coronavirus pandemic is a human tragedy of vast proportions – as well as the terrible human toll, COVID-19 has led to economies across the globe going into physical lockdown and financial freefall. Entire populations are adapting to the “stay at home” edict, to safeguard the vulnerable – and some of these changes will lead to long-lasting or perhaps permanent changes in the way we live or work. This note describes some of our client companies whose business models are well adapted to these changes, or who might see a change in long-term structural demand.
Companies: AMO BGO FDM GAMA KAPE LOOP TERN ZOO
Telit has moved to preserve its profit levels during the COVID-19 pandemic. The widespread lockdown of unknown duration is likely to slow some of its YoY revenue growth, and we trim our FY 2020 revenue expectations, although we do still continue to expect LFL growth (excluding the two months of Automotive in FY 2019). Despite its significant cash reserves from the disposal, management is prudently adopting a cost-reduction plan to ensure the company’s earnings are maintained at the targeted level. Notably this involves a temporary 15% salary reduction for senior management and a reduction in all areas of discretionary spending, including opex and capex. Strategic plans (such as long-term product development and the movement of production outside China) will be unaffected. We are pleased to hear the supply chain remains steady with minimal disruption in module production as the lockdown across Asia is partially lifted. At this stage, we leave FY 2021 forecasts unchanged, given a strong market position.
Companies: Telit Communications
SigmaRoc's shares have fallen 34% in the last two months as the market underestimates the group's financial strength and infrastructure exposure. The group can withstand eight months without revenues, but this is academic as activity across the group is even now enough to generate positive cash flows.
Major new exclusive concert series launched; Buy