ATON - Daily Dashboard, TMT, Apr 9, 2012.
Kazakhtelecom: Healthy 2011, Lacklustre 4Q11 - Now Nearly the Cheapest Stock among EMEA Telecoms
2011 results: doubledigit sales growth, profitability improvement and negative net debt... Bloomberg reported on Friday
(6 Apr) that Kazakhtelecom released its 2011 IFRS results. Revenue rose 13.5% YoY to KZT173bn thanks to strong data revenue dynamics (+27% YoYI3/4 34% of total revenue). The company also improved its profitability vs last year, with OIBDA margin up 0.6 ppts YoY to 37.7% in 2011. The profit from its continuing operations (not including the income from the operations of KCELL, which was sold in February) stood at KZT17bn, thus implying a 10% margin. Net profit, inclusive of the KCELL income, was KZT50bn (29% margin).
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Net debt was negative at- KZT5bn and the company received $1.5bn of cash for the sale of its 49% stake in KCELL on 1 Feb 2012.
a[bar]although 4Q11 profitability seasonally unimpressive. Looking at the numbers from a quarterly perspective, the 4Q11 results were not impressive, in our view: OIBDA margin in 4Q11 was 28% vs 36% in 3Q11, based on our calculations, likely due to seasonal weakness.
Implication for 2011 dividends: 3% yield. If we assume that the FY11 dividend payout ratio remains at 17.5%, the FY11E dividend could again be KZT720/ per share, implying a 2.8% dividend yield for the common shares and 3.3% for prefs. It has been Kazakhtelecom's practice to announce the dividendcutoff date after the official dividend announcement.
Any chance of extra dividends in 2012? The company is underleveraged. In addition, Kazakhtelecom's FY12 capex can be financed from regular operating activity, in our view. As such, extraordinary dividends are possible.
If we assume that twothirds of the proceeds of KCELL's sale are distributed as extraordinary dividends, the common shares' dividend yield could reach about 50% (KZT12,000).
Almost the cheapest stock in the EMEA telecoms universe. KCell's valuation reveals Kazakhtelecom's tremendous
undervaluation: the KCELL stake is worth $1.5bn while Kazakhtelecom's MktCap is $2.0bn and its 2011 IFRS net debt is $ 33mn. As such, Kazakhtelecom's core fixedline business is being valued at only $423mn while the business generated about $450mn of OIBDA in 2011.
Kazakhtelecom remains one of the cheapest telecom stocks in the EMEA telecom universe: based on Bloomberg data, it trades at a FY11 EV/EBITDA of 1x vs EM fixedline peers' 5x average.
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