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ETISALAT
ETISALAT
In a report issued Thursday, NBK Capital maintained its fair value for Emirates Telecommunications Corp (Etisalat) at AED 16.80 – with 45% upside potential - and reinstated its Buy recommendation on the stock.
Etisalat reported its 3Q2014 financials this morning, with reported earnings coming in ahead of our estimate as a result of higher-than-expected EBITDA. 3Q2014 revenue increased by 38% YoY to AED 13.2 billion, in line with our AED 12.8 billion forecast and Bloomberg consensus of AED 13.2 billion. The main surprise was at the EBITDA level, which grew by 51% YoY to AED 7.0 billion, 13% higher than our AED 6.2 billion forecast and 9% above Bloomberg consensus of AED 6.4 billion. The beat at the EBITDA level was mainly due to positive non-telecom EBITDA contribution, which was calculated at AED 391 million.
Overall, this translated into an EBITDA margin of 52.7% compared to 48.1% in 3Q2013. Net income increased by 22% YoY to AED 2.2 billion, 19% above our AED 1.9 billion forecast, yet 8% short of Bloomberg consensus of AED 2.4 billion, according to NBK Capital. UAE remains main value driver. The UAE operations (51% of 3Q2014 revenue) maintained its strong momentum, with revenue growing by 10% YoY to AED 6.8 billion, the highest growth rate this year, mainly due to data demand (fixed and mobile). Top line growth and ongoing cost optimization efforts led to EBITDA improving slightly by 0.3% QoQ and by 8% YoY, translating into an EBITDA margin of 57% in 3Q2014 compared to 56% in 2Q2014 and 58% in 3Q2013.
Maroc Telecom consolidation and Egypt recovery drive international portfolio. International revenue grew by 89% YoY to AED 6.4 billion, mainly due to the Maroc Telecom consolidation (excluding Maroc Telecom, international revenue growth would have declined by 1.6% YoY). While Maroc Telecom was the main growth driver, we note that effective promotions in Egypt paid off, with the subsidiary recording a 7% YoY increase in revenue (+10% YoY in LC), marking its fourth consecutive quarter of annual growth. On the other hand, competitive pressures in Afghanistan and the challenging environment in Pakistan, Tanzania, and the Ivory Coast continued to curb overall operational performance.
Lower income from associates and high FX losses reduce bottom line gains. Despite the strong operational performance registered during the quarter, net earnings grew at a slower pace than EBITDA at 22% YoY, due to: a) higher FX losses and b) a loss amounting to AED 12 million from share of results in associates (which include Nigeria, Mobily and Thuraya) compared to a gain of AED 441 million in 3Q2013.
“All in all, our full year forecasts are in line with management’s year-end guidance of 25-27% YoY revenue growth and 49-50% EBITDA margin, accordingly, we do not expect to have any material changes to our estimates,” the report issued said.
Etisalat reported its 3Q2014 financials this morning, with reported earnings coming in ahead of our estimate as a result of higher-than-expected EBITDA. 3Q2014 revenue increased by 38% YoY to AED 13.2 billion, in line with our AED 12.8 billion forecast and Bloomberg consensus of AED 13.2 billion. The main surprise was at the EBITDA level, which grew by 51% YoY to AED 7.0 billion, 13% higher than our AED 6.2 billion forecast and 9% above Bloomberg consensus of AED 6.4 billion. The beat at the EBITDA level was mainly due to positive non-telecom EBITDA contribution, which was calculated at AED 391 million.
Overall, this translated into an EBITDA margin of 52.7% compared to 48.1% in 3Q2013. Net income increased by 22% YoY to AED 2.2 billion, 19% above our AED 1.9 billion forecast, yet 8% short of Bloomberg consensus of AED 2.4 billion, according to NBK Capital. UAE remains main value driver. The UAE operations (51% of 3Q2014 revenue) maintained its strong momentum, with revenue growing by 10% YoY to AED 6.8 billion, the highest growth rate this year, mainly due to data demand (fixed and mobile). Top line growth and ongoing cost optimization efforts led to EBITDA improving slightly by 0.3% QoQ and by 8% YoY, translating into an EBITDA margin of 57% in 3Q2014 compared to 56% in 2Q2014 and 58% in 3Q2013.
Maroc Telecom consolidation and Egypt recovery drive international portfolio. International revenue grew by 89% YoY to AED 6.4 billion, mainly due to the Maroc Telecom consolidation (excluding Maroc Telecom, international revenue growth would have declined by 1.6% YoY). While Maroc Telecom was the main growth driver, we note that effective promotions in Egypt paid off, with the subsidiary recording a 7% YoY increase in revenue (+10% YoY in LC), marking its fourth consecutive quarter of annual growth. On the other hand, competitive pressures in Afghanistan and the challenging environment in Pakistan, Tanzania, and the Ivory Coast continued to curb overall operational performance.
Lower income from associates and high FX losses reduce bottom line gains. Despite the strong operational performance registered during the quarter, net earnings grew at a slower pace than EBITDA at 22% YoY, due to: a) higher FX losses and b) a loss amounting to AED 12 million from share of results in associates (which include Nigeria, Mobily and Thuraya) compared to a gain of AED 441 million in 3Q2013.
“All in all, our full year forecasts are in line with management’s year-end guidance of 25-27% YoY revenue growth and 49-50% EBITDA margin, accordingly, we do not expect to have any material changes to our estimates,” the report issued said.
Source:
Mubasher
