May
27
Last Friday MTS output US GAAP report for 1Q 2009. Sales of the company for the quarter totaled 1.8 bn USD. OIDBA – 832 mn USD. By the end of the quarter net loss was gained in the volume of 58 mn USD. The main reason for negative operating was loss from currency exchange, which appeared due to ruble devaluation versus dollar, in which the significant share of MTS’ debt is nominated.
Operating estimates of the company indicated lowering on almost all States. Particularly, MOU dropped everywhere, except for Ukraine, which is due to the economy crisis, decrease of solvent demand and respectively due to communication services consumption lowering.
Nevertheless, we suppose the reduction of MTS’ operating estimates is not of critical nature and the affect of the economy crisis on the communication branch is not that considerable, as on the other industries. Note, the quarter results mostly meet our annual expectations.
We revised our model of the company and introduced significant corrections to it due to the recommended all-time high dividends for 2008, and also due to new borrowings by MTS. The impact of the given factors on the total estimation was insignificant.
Along with that, the Comstar acquisition process is going at full speed. Currently there is no definite information on the amount and the structure of the deal. At the same time the provisional research indicates that the execution of the given deal depends on many factors, not reliant on MTS, Comstar and Sistema. Along with that within the coming year the coming out details of the deal might affect MTS shares’ rates, along with Comstar’s rate.
Our new estimation of MTS’ shares forms 10.29 USD (51.46 USD per ADR) versus the former one at the level of 10.6 USD. Note, our estimation does not include acquisition of Comstar and all related to it (possible growth of debt load of MTS, upping of income and expense, synergetic affect from the merger). Anyway, the shares of the company obtain significant growth potential, due to which we confirm the recommendation BUY for the shares of MTS.
MTS: Cellular communication still standing - May 27, 2009 (PDF)