Jul
8
Centertelecom is the first one, to publish its IAS 2007 report. Some results excelled Centertelecom from other companies of Svyazinvest. OIBDA margin of the company formed 36.2% in 2007, the highest results of the sector (excluding Volgatelecom and Uralsvyazinform, which did not announce their financial reports at the moment of our model creation). ROIC ratio of Centertelecom formed 16.5%, the highest results among IRCs. Company’s debt load was also reduced, the financial leverage formed 1.22 (the previous result totaled 1.6), Debt/OIBDA ratio formed 1.71 (2.08 in 2006).
Company’s revenue increased by +21% last year. However, we expect that the results of 2008 will be lower and the growth could form 6%. We did not reflect a growth of local communication tariffs in our model, which was the main growth driver of Centertelecom’s revenue during prior year. We expect that company will implement new services and the achieved revenue will grow at high rate, due to development of broadband-markets.
The company confirmed the forecasts concerning its CapEx to 2012, which will form about 57.5 bn RUR. We think that the given figures are too high for Centertelecom and it will not be able to cover these expenses from own funds and it will have an influence on company’s leverage.
It should be mentioned that Centertelecom could face a necessity of merging with Central Telegraph. We think that it will have a positive effect on Centertelecom’s business and provide an access to the Moscow broadband-market. However, we will not change our model until the decision is applied in Svyazinvest.
We decreased the fair value of Centertelecom’s securities by -13% to 0.9018 USD per common and 0.6763 USD per preferred share (the previous estimations formed: 1.0357 USD and 0.7768 USD respectively). The fall can be explained by low possibility of tariffs growth on local communications during this year and that is why we did not reflect it in our model. However, the prices of common and preferred shares decreased, since the beginning of the year, by -31% and by -39% respectively. Thus, in our point of view, the prices of company’s shares have a chance to increase, even after our estimations were decreased. We increased our estimation on both Centertelecom’s securities to “BUY” recommendations (the previous was “ACCUMULATE” recommendation on common and “BUY” recommendation on preferred shares).
Centertelecom: Opportunity to grow - July 8, 2008 (PDF)
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