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03 Jul 2020
Valuation Station - Sun On Stores
Bouygues SA (EN:WBO), 0 | Swisscom AG (0QKI:LON), 0 | Telecom Italia S.p.A. (TIT:WBO), 0 | BT Group plc (BT.A:LON), 104 | Telefonica SA (TEF:WBO), 0 | Royal KPN NV (KPN:WBO), 0 | Vodafone Group Plc (VOD:LON), 68.8 | Deutsche Telekom AG (DTE:WBO), 0 | Orange SA (ORA:WBO), 0 | Tele2 AB Class B (NCYD:FRA), 0 | Orange Belgium SA (OBEL:BRU), 0 | Elisa Oyj Class A (ELISA:HEL), 0 | Telia Company AB (TELIA1:HEL), 0 | Telenor ASA (TEQ:FRA), 0 | United Internet AG (UTDI:WBO), 0 | Proximus SA (PROX:WBO), 0 | freenet AG (FNTN:WBO), 0 | 1&1 AG (DRI:WBO), 0 | Telefonica Deutschland Holding AG (O2D:WBO), 0 | Masmovil Ibercom (MAS:BME), 0 | Cellnex Telecom S.A. (CLNX:WBO), 0 | Infrastrutture Wireless Italiane S.p.A. (WI8:BER), 0 | Airtel Africa Plc (AAF:LON), 109 | Liberty Global Ltd. Class A (LBTYAN:MEX), 0
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Valuation Station - Sun On Stores
Bouygues SA (EN:WBO), 0 | Swisscom AG (0QKI:LON), 0 | Telecom Italia S.p.A. (TIT:WBO), 0 | BT Group plc (BT.A:LON), 104 | Telefonica SA (TEF:WBO), 0 | Royal KPN NV (KPN:WBO), 0 | Vodafone Group Plc (VOD:LON), 68.8 | Deutsche Telekom AG (DTE:WBO), 0 | Orange SA (ORA:WBO), 0 | Tele2 AB Class B (NCYD:FRA), 0 | Orange Belgium SA (OBEL:BRU), 0 | Elisa Oyj Class A (ELISA:HEL), 0 | Telia Company AB (TELIA1:HEL), 0 | Telenor ASA (TEQ:FRA), 0 | United Internet AG (UTDI:WBO), 0 | Proximus SA (PROX:WBO), 0 | freenet AG (FNTN:WBO), 0 | 1&1 AG (DRI:WBO), 0 | Telefonica Deutschland Holding AG (O2D:WBO), 0 | Masmovil Ibercom (MAS:BME), 0 | Cellnex Telecom S.A. (CLNX:WBO), 0 | Infrastrutture Wireless Italiane S.p.A. (WI8:BER), 0 | Airtel Africa Plc (AAF:LON), 109 | Liberty Global Ltd. Class A (LBTYAN:MEX), 0
- Published:
03 Jul 2020 -
Author:
Kohulan Paramaguru -
Pages:
27
Enough confidence back from our CEO Conference to buy Telcos?
Management commentary from our CEO Conference earlier in June was relatively positive with an outlook, if not unchanged, helped by a renewed focus on connectivity. However, this also fuels the debate on whether the sector can benefit from lighter regulatory oversight or contrariwise, will be forced to put more Capex into the ground. Whilst the sector continues to look cheap on FCFE yield (48% discount to the market is well above the long-run average), on an unlevered yield basis the sector trades bang in line with its long-run average. Fundamentally, we still have many concerns over the sector; this has only been exacerbated by Covid-19 - see Five minutes of Fame and a first sequential deterioration in mobile pricing since 1Q19 - see our Trends Tracker preview.
Fundamentals still down on 12-month view, with EBIT at c-9% and OpFCF at c-22.5%
Consensus sales estimates were up +1.4% in June, reversing some of the earnings cuts of March as Europe opened back its doors (and shops). However, the more optimistic outlook is less clear on margin, with EBIT down -1.6% (but EBITDA up +0.6%). Capex estimates were also up +3.6% (but are only up +0.7% since February-end) leading to an overall OpFCF downgrade of -6.8% (proxy from EBIT; -2.4% from EBITDA).
MAS(=) and EKT(-) were winners and FNET(-) and TT(-) the losers last month
MasMovil''s take-out offer saw the stock rise above the EUR22.5 bid on June 1th whilst elsewhere in Spain, Euskaltel benefited from rising consolidation hopes. Contrariwise, Freenet''s dividend cut and larger COVID exposure continued to drive outflows whilst TalkTalk results raised investors'' worries on the cash-burn of the business (with the concerns further fuelled by the debate on the accounting treatment of ''contracts costs'').
July trade: we prefer VOD(+) over TEF(-)
Vodafone''s guidance looks the most conservative in the sector (Worst Case in the Price?) and its CEO...