A favourable ruling on the Spanish merger is expected to boost the stock

Q3 revenues and EBITDAaL, up respectively by 1.8% and 1.4% yoy, were in line with expectations. Capex was down by 7% yoy also in line with the target of a significant reduction in 2023. Orange is still awaiting a ruling regarding the merger of its Spanish activities with MasMovil. However, Christel Heydemann appeared confident that the transaction can be completed in the Q1 2024. For the past year Orange has been in a virtuous circle of FCF growth: we maintain our Buy.

Everything is OK despite a last difficult year in the Enterprise segment

Q2 revenues were slightly better than expected, up by 2.6% yoy and lfl while the EBITDA was more in line with expectations, up by 1% yoy and lfl. The only weak point of the release was the expected pronounced decline in the Enterprise EBITDAaL which should only improve from 2024. The clear positive is that, in 2022, the group entered a virtuous circle of vigorous FCF growth for the coming years. We maintain our strong buy on the stock.

On track with the plan

Q1 revenues were in line with expectations, up by 1.3% yoy and lfl while the EBITDA was up by 0.5% yoy and capex down by 5%. Note that the EBITDA margin is traditionally lower in the Q1 and the next few quarters will further benefit from the price increases introduced in early 2023. This Q1 confirms that, in 2022, the group entered a virtuous circle of vigorous FCF growth for the coming years. We maintain our Buy on the stock.

The dividend will finally be increased in 2023 and 2024

The Q4 performance was pretty much in line with our expectations. The key point is that Orange has announced it will increase its dividend floor to 72 euro cents for 2023, and to 75 euro cents for 2024. Very good news indeed in that only three months ago the group had dashed our hopes of a 2022 dividend increase despite the sharp expected rise in Orange’s cash flow in 2022 (+27% yoy). We maintain our Buy on the stock.

Unfortunately no dividend increase for 2022

Nothing special to say regarding the Q3 performance which was pretty much in line with our expectations, with a reassuring Spain but a modest growth slow down in Africa. The key point is that having confirmed its outlook of EBITDA growth coupled with a capex decline, the group had been expected to increase its dividend. Unfortunately this will not be the case. Since Telcos are yield stocks and shareholders have been overlooked, this news is likely to weigh on the stock in the coming months.

Confirmation of entering a virtuous circle

A decent set of Q2 results for Orange with stable revenues yoy in reported terms and EBITDA up by 4.5% yoy (adjusted for the co-financing). With a forecast of a fairly significant increase in EBITDA less capex, the group should be able to steadily increase its dividend from 2023. We stick to our Strong Buy on the stock. However, in the short term, the rotation toward quality growth stocks at the expense of telcos is likely to continue.

A Q1 in accordance with the start of a possible virtuous circle

The Q1 figures were in line with our expectations but they confirmed the outlook for 2022 of an EBITDA growth of 2.5/3% and a c.5% decrease in capex. We still expect the group to enter a virtuous circle of vigorous FCF growth in the coming years allowing steady dividend growth. So we stick to our Strong Buy. Orange deserves to return to the best-in-class group in the telecom sector consistent with its 4.5% dividend yield.

Stephane Richard's great leaving gift

Orange and MasMovil announced this morning the combination of their operations in Spain. The combined entity would become a strong second player in Spain with revenues of €7.5bn (vs €12.5bn for Telefonica), EBITDAaL of €2.2bn. It is expected to generate €450m of synergies from the third year post closing onwards. So, clearly a nice leaving gift for Orange from its future ex-CEO Stephane Richard. We maintain our Buy on the stock.

Start of a possible virtuous circle

Nothing special to say about the Q4 results which were in line with expectations. For the whole year, revenues were up by 0.8% yoy and lfl, while EBITDA was down by 0.5% yoy. The key point is indeed the outlook for 2022 which is finally as we hoped. EBITDA should grow by 2.5-3%, while capex should decrease by 5%. The time has arrived to see a regular increase in the FCF in the coming years. We stick to our Strong Buy.

A dividend desperately... flat

A correct Q2 for Orange but the poor EBITDA outlook for 2021 has been confirmed and the dividend proposed for 2021 will be stable at €0.7. So nothing to wake up the stock. The group is not expensive compared to its peers, and it offers an enticing c.7.5% dividend yield. Although not for this year, the group could surprise the market by a higher dividend increase than expected in the coming years. We stick to our Strong Buy.

A solid Q4 but a misunderstanding regarding the towers assets

The EBITDAaL was eventually down by 1% yoy but should have grown by 3.2% excluding the COVID-19 impact. Despite this solid performance and the return to normal of its dividend, the stock is still languishing 20% below its pre-pandemic levels. At first investors were also quite circumspect about Orange’s determination to keep its new towers company within the scope of the group. But later, Stephane Richard made it clear that Orange won’t go it alone in the towers space.

A return to a €0.70 dividend for 2020

A decent Q3 for Orange as the impact of COVID-19 was more limited than in Q2 with only the sharp decline in roaming due to travel restrictions. The key point of this release is, however, a proposed return to a €0.70 dividend for 2020 (with an interim dividend of €0.40 in December). We maintain our Strong Buy on the stock with a 7.75% dividend yield for the coming 12 months.

A correct Q2 and a return to normal for the future dividends

Q2 revenues were down by only 0.4% yoy and the impact of COVID-19 was indeed very limited. This correct Q2 performance reflects a better than expected solid growth in France. But, more importantly, given an expected stable EBITDA less capex in 2020, Orange will pay a dividend of €0.70 for 2020 (to be confirmed after Q3). So a return to normal which deserves a better price. We maintain our Strong Buy on the stock.

Take advantage of the disappointment on dividend to... buy the stock

Orange presented yesterday its new strategic plan “Engage 2025”. The stock was, however, down by 4% yesterday while the group refused to commit to increasing its dividends over the period. We maintain, however, our opinion at Buy on the stock with a significant upside.

Solid growth in Africa but slight disappointment in Spain

Q2 revenues were up by 0.7% yoy and lfl, a satisfactory number and better than the zero growth recorded in Q1. The correct Q2 performance reflects this time a very solid resilience in France (+0.4%) and an acceleration in Africa & Middle East (+5.8%), while Spain was disappointing with revenues down by 1.6% due to a highly promotional market. EBITDA has grown by 2% yoy and lfl and was slightly above expectations. We maintain our Buy on the stock.

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

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Morning Note – 21 December 2023

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CyanConnode (CYAN LN) - FY23 results: Solid outlook

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

Filtronic - Expecting 10% pa compound revenue growth to FY24

As revealed in last week’s interim update, strong demand continued through 1H23 and into 2H23, fuelled by demand for backhaul modules in the ongoing 5G rollout, newly won defence contracts and a post-COVID recovery in critical coms. This led to solid +5% yoy growth in 1H revenue and a current record order book of £17m – a full year’s worth of business for the group. The update also revealed that shortages and the resulting price hikes on specific components led to FTC delaying some 2H23 producti