A solid Q2 for Elisa but we maintain our opinion at Reduce: we still believe the group is now too expensive as it is going to see its EBITDA growth slowing in 2020/21. Be cautious, Elisa is at risk of reverting to a no-growth status in the telecom sector in H2 20. According to the outlook given by management, 2020 revenue is estimated to be at the same level or slightly higher than in 2019 and… the same thing for EBITDA.
Companies: Elisa Oyj
A solid Q1 for Elisa but we maintain, however, our opinion at Reduce: we still believe the group is now too expensive as it is going to see its EBITDA growth slowing in 2020/21. The group’s EV is trading at no less than 13.5x EBITDA, which is very expensive compared to other European telcos. The group has paid a dividend of €1.85 for 2019, corresponding to a 3.5% dividend yield which stands well below the average of its peers at c.5.5%.
The Q4 release confirmed that, organically, Elisa is indeed a no-growth story in terms of revenue while its efficiency programmes and the good integration of acquisitions allowed a good increase in its EBITDA throughout 2019.
We still believe the group is now too expensive as it is going to see its EBITDA growth slowing in 2020. We maintain our opinion on the stock at reduce
Q2 revenues were still down by nearly 2% yoy, as in the previous quarter. Although the EBITDA was quite correct (+2.8% yoy) and that 5G should allow slightly better figures in H2, the group seems fully priced. It already offers a 4.3% dividend yield, which is the lowest in its sector in Europe.
Stock down by 3% at the opening.
Q4 revenues were down by 0.4% yoy, while EBITDA grew by 3%. Note that revenue growth is now flat as the acquisitions made at the end of 2016 and the beginning of 2017 (Starman and Santa Monica) have had an impact up to Q2 18. The Q3 and Q4 flat revenues reflect indeed that Elisa without external growth is a classic no-growth story in the European telecom sector.
Like in previous quarters, efficiency improvements have allowed a slight increase in the EBITDA margin. Elisa is indeed continuing its productivity improvement development by increasing automation and data analytics in different processes, such as customer interactions, network operations and delivery.
So it’s no surprise if for 2019 management anticipates revenue and EBITDA to be at the same level or slightly higher than in 2018.
The board will propose a dividend of €1.75 for 2018 to be paid in 2019. This is slightly above what we had in our model (€1.7) but it is in line with the global consensus.
Elisa released this morning its Q3 update.
Q3 revenues were flat yoy while EBITDA grew by 2.1%. Note that revenue growth is poorer than in the previous quarter (Q2 revenues were up by 2.8%) but the acquisitions made at end 2016 and the beginning of 2017 (Starman and Santa Monica) have had an impact of c.1.5% on the accounts in Q2. So if we exclude moreover some of the recent divestments made by the group, the Q3 organic growth at c.1% yoy is globally correct and in line with the previous quarters. It reflects indeed that Elisa without external growth is a classic no-growth story in the European telecom sector.
Like in previous quarters, efficiency improvements have allowed a slight increase in the EBITDA margin (37.2% vs 36.3% a year ago). Elisa is indeed continuing its productivity improvement development by increasing automation and data analytics in different processes, such as customer interactions, network operations and delivery.
Note that, for the whole year, revenue and EBITDA are estimated to be slightly higher than in 2017 and no longer expected to be at the same level.
Remember that Elisa paid a dividend of €1.65 for 2017 and should pay, in our view, €1.70 for 2018.
Q4 revenue increased by 9% on the previous year, while EBITDA grew by 11% (excluding non-recurring items related to restructuring costs).
Like in the previous quarters, recent acquisitions (Starman in Estonia and Santa Monica in the Finnish corporate segment), growth in mobile services and digital services in both customer segments have affected revenue positively. The Q4 numbers show better organic growth than in Q3 (nearly +2% vs only +1% in Q3): the decrease in usage and subscriptions of traditional fixed telecom services, and lower roaming and interconnection revenue in Finland, have affected revenue less negatively.
As for 2018, revenue and comparable EBITDA are estimated to be at the same level or slightly higher than in 2017 (note recent acquisitions are still expected to increase Q1 revenue by 7%). Capex is expected to be a maximum of 12% of revenue.
The board will propose at the Annual General Meeting a dividend of €1.65 per share (a 10% increase compared to the previous year), better than the €1.55 we had in our model.
Q3 revenue increased by 8% on the previous year, while EBITDA grew by 7%.
Like in Q2, recent acquisitions (in particular in Estonia), growth in mobile services and digital services in both customer segments have affected revenue positively. But the Q3 numbers still show low organic growth, like in previous quarters. However, the decrease in usage and subscriptions of traditional fixed telecom services, and lower roaming and interconnection revenue in Finland, have affected revenue negatively.
Q2 revenues and EBITDA have both increased by 13% yoy thanks to the consolidation of Starman and Santa Monica Networks (completed in April). Adjusted for these acquisitions, revenues and EBITDA were, however, up by c.3.5%, a quite correct performance in a mature and competitive Finnish market.
Q1 revenues have increased by 7% yoy while EBITDA grew by 5% thanks to the consolidation of Anvia (this is the last quarter of adjustment as the company was bought a year ago). Adjusted for this acquisition, revenues and EBITDA were, however, up by c.2.5%, a quite correct performance in a mature and competitive Finnish market.
Note the Estonian Competition Authority approved on 20/03/2017 the transaction in which Elisa acquires 100% of Starman’s capital. The transaction is now expected to be closed during April. As a reminder, Elisa bought Starman on 13/12/2016 for €151m to strengthen its position in Estonia (10% of its business). Starman (€37m of revenues in 2015) is the Estonian pay TV market leader (35% market share), has high profitability (EBITDA margin of 49%) and a growth track record. It will allow Elisa to create a new integrated operator in Estonia (it is already the second mobile telco in this little country) with a cable network covering more than 50% of Estonian homes. Note Elisa was providing temporary loan funding to sellers (which will be repaid on the closing of the acquisition) so the net debt at the end of 2016 (€1.12bn) already includes the acquisition price of Starman.
Q4 revenues have increased by 7% yoy while EBITDA grew by 6% thanks to the consolidation of Anvia. Adjusted for this acquisition, revenues were, however, up by 2.5% while the EBITDA was up by nearly 3.5%.
Elisa has given a relatively cautious outlook for 2017: full-year revenue and EBITDA are estimated to be at the same level or slightly higher than in 2016. Full-year capex is expected to be a maximum of 13% of revenue (a number below the average of its peers but it’s quite logical given that Elisa’s 4G LTE network is already covering 100% of Finland). But this outlook does not include the recent Starman acquisition (for c.€150m) in Estonia. Note Elisa is providing temporary loan funding to sellers (which will be repaid on the closing of the acquisition and in April 2017) so the net debt at end 2016 (€1.12bn) already includes the acquisition price of Starman.
Q2 revenues increased by 1% yoy while EBITDA grew by 2% thanks to continued efficiency improvements. A quarter perfectly in line with expectations after a slightly better than expected Q1 (revenues were up by 2% yoy but EBITDA had grown in parallel by 6%).
A slightly better than expected Q1 for Elisa with revenues up by 2% yoy (to €390m), a number in line with expectations but EBITDA grew in parallel by 6% yoy (to €137m) thanks to continued efficiency improvements.
The outlook for 2016 is unchanged: full-year revenue and EBITDA are estimated to be at the same level as in 2015. Full-year capex is expected to be a maximum of 12% of revenue (quite logical given that Elisa’s 4G LTE network is already covering 98% of Finland).
A slightly better than expected Q4 for Elisa with revenues up by 5% yoy (to €404m) while the EBITDA, excluding non-recurring items, also grew by 5% yoy (to €131m) thanks to continued efficiency improvements. Note an exceptional charge of €3m which relates to personnel reductions.
The outlook for 2016 is quite similar to the one given last year: full-year revenue and EBITDA are estimated to be at the same level as in 2015. Full-year capex is expected to be a maximum of 12% of revenue (quite logical given that Elisa’s 4G LTE network is already covering 98% of Finland).
An as expected Q2 for Elisa with revenues up by 2% yoy (to €390m) while the EBITDA grew by 3% yoy (to €131m) thanks to continued efficiency improvements. Remember that three months ago Elisa had kicked off the telcos' Q1 release season with stable revenues and a slight 2% increase in the EBITDA.
The outlook for 2015 is unchanged: full-year revenue and EBITDA are estimated to be at the same level as in 2014. Full-year capex is expected to be a maximum of 12% of revenue (quite logical given that Elisa’s 4G LTE network is already covering 97% of Finland).
Research Tree provides access to ongoing research coverage, media content and regulatory news on Elisa Oyj.
We currently have 20 research reports from 2
Bigblu Broadband has today announced the sale of its UK and European satellite broadband operations to Eutelsat for a maximum consideration of £39.3m, with £37.8m payable in cash upon completion. This represents 7.0x FY19 EBITDA of £5.6m for the sale assets, and values the assets ahead of other UK telecom and satellite peers on c6x EV/EBITDA. BBB intends to use the proceeds to reduce its net debt, and evaluate opportunities to enhance shareholder value that could include shareholder returns. In this report we lay out the investment case for BBB’s continuing operations (UK fixed wireless/Quickline, Australia, and Nordics), and introduce conservative forecasts for the continuing group that do not include tender wins for BBB’s Quickline division. This still leads us to expect FY21 organic revenue growth of +3% and EBITDA growth of +9% that compares to 12-month forward EBITDA growth for peers in Managed Services & Telecoms, and the finnCap Next 50, of +3% and +7% respectively. Combined with a net cash position and 2% EFCF yield in FY21, BBB looks undervalued on 7x 12-month forward EV/EBITDA (Managed Services & Telecoms peers 11x, fc Next 50 16x), and we reiterate our target price of 155p based on 12x FY21 EV/EBITDA.
Companies: Bigblu Broadband Plc
Both Q1 revenues and EBITDA were down by 7% yoy with a COVID-19 impact a little bit more significant than the average for telcos.
The group is currently investing heavily in its networks and one day this will pay off, although for the moment we are still waiting for a…revenue stabilisation and COVID-19 won’t help matters in 2020/21. We maintain, however, our Buy opinion: now the dividend has been cut, BT does not deserve such a low price.
Companies: BT Group Plc
Spirent’s results last week showed good traction from the group’s strategic growth areas (Lifecycle Service Assurance and Application Security), which combined with effective cost control, resulted in strong earnings growth and excellent cash generation. The group remains heavily H2 weighted, but we believe it is well placed to deliver a long awaited return to top-line growth going forwards. With gross margins remaining strong and management maintaining a tight grip on costs, we expect the growth to result in continued margin expansion across our forecast period. We make significant upgrades to all forecast years and increase our target price to 139p. Buy.
Companies: Spirent Communications Plc
Stripe Inc said on Thursday it is raising $250 million in its latest funding round, which values the payments start-up at $35 billion, a dramatic 56% surge from a previous valuation at the start of the year. The latest valuation puts Stripe in the same league as home rental giant Airbnb Inc, which is also planning go public in 2020. Stripe has received strong positive feedback from our private FinTech contacts. Meanwhile, the IPO pipeline for 2020 is already heating up.
Companies: CALL TRAK BGO BOKU ECK EQLS LOOP NET QTX SEE TECH TCM TRCS
Disney+ hits 22m mobile users, SoftBank backed firm downsizes IPO, German mobile carrier selects Huawei
Companies: ENET 7DIG MVR ZOO ZOO AMO BOOM MIRA MWE
Bigblu Broadband (BBB) has reported a strong set of FY19 results that demonstrate strong organic growth, and are in line to ahead of the previous consensus estimates. This establishes a strong foundation for BBB’s future growth, and we expect that BBB will see revenue, EBITDA, and EPS growth in FY20 and FY21 despite the uncertainty caused by Coronavirus. This reflects that BBB has a robust and resilient investment case, which we explain in depth in this report. We consequently believe that BBB is undervalued on 12m fwd multiples of 5x EV/EBITDA and 7x adj P/E, and initiate with a TP of 155p or 15x FY21 adj EPS.
Update to forecasts – Neutral
Companies: The Vitec Group Plc
The Board has finally decided to suspend its final dividend for 2019/20 and all dividends for 2020/21. This move is structural and not really linked to the Covid19 crisis in that it is to invest in FTTP and 5G, and to fund a major new 5-year modernisation programme.
These announcements are a first buy signal although the recovery will take time and the group must now stabilize its revenues which will not be easy given the Covid19 pandemic context.
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 Plc
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
Gamma’s performance continues to speak for itself. The positive trading update for H1 20 reflects a similar tone to that of its recent AGM statement, containing an acknowledgement of the current operating environment while reporting a good performance for the six months. A high rate of recurring revenue, ‘minimal’ contract cancellations and no increase in bad debts remain key features. It was a busy first half with continued demand (albeit COVID-19 affected in Q2) for Cloud PBX and UCaaS (Unified Communications as a Service) products in the UK. Acquisitions in Spain and the UK were swiftly followed by the HFO deal in Germany in early July and the purchase of GnTel in the Netherlands last week. Management expects that EBITDA and EPS will be ahead of consensus for the year. We note the strong momentum in the business but, as we are at the upper end of the consensus range, we leave our estimates unchanged at present.
Companies: Gamma Communications Plc
Blackbird plc* (BIRD.L, 17.5p/£58.8m) | MTI Wireless Edge Ltd* (MWE.L, 31.5p/£27.7m) | Mirada plc* (MIRA.L, 90.0p/£8.0m) | Brave Bison plc* (BBSN.L, 1.375p/£8.4m)
Companies: BIRD MWE MIRA BBSN
An expected resilience to the COVID-19 negative impacts in Q1. The group can indeed congratulate itself on having strengthened in recent years its fixed activities: in Germany, which represents 40% of Vodafone’s activities in Europe, service revenues were flat yoy in Q1.
The monetisation of its infrastructure assets is continuing and, given the slight growth that the group could offer in the coming years, we maintain our Buy on the stock.
In 2020, despite the COVID-19 impact, revenue should decrease by around 2.5% yoy organically. Beyond the pandemic crisis, Millicom remains an interesting ‘growth’ story (further boosted by acquisitions) in a sector which experiences none. Management’s medium-term goal (confirmed after the Q2 release) is indeed to deliver mid single-digit organic service revenue growth and mid-to-high single-digit organic EBITDA growth.
We remain at Buy on the stock.
Companies: Millicom International Cellular SA
Despite the disruption caused by COVID-19, Kcell delivered both revenue and profit growth in Q2. Impressive handset sales (up 62% y-o-y) offset the impact of a consumer spending slowdown and an exit from off-net bulk SMS. With Kazakhstan entering a new lockdown, the outlook remains uncertain. Yet Q2 clearly shows Kcell’s resilience and longer term the scope for group synergies in a consolidated market should drive healthy profit growth.
Companies: Kcell JSC