Aug
14
Last Tuesday, MTS has published its financial results for 2Q and 1H 2008 under US GAAP report. The company has demonstrated good dynamics at all markets, where company runs its business. Among the positive results are: revenue (+10.8% against 1Q 2008), totaling higher than 2.5 bn USD. Moreover, MTS has all opportunities to reach revenue value above 10 bn USD for year 2008. OIBDA margin added 1.8 p.p. and exceeded 50% over 2Q 2008.
In order to sum up MTS’ results we can say that the company continues stimulating the subscribers’ activity, to more active usage of its services. Therefore, such stimulation concerns not only the emerging markets, but developed markets as well, where cellular penetration exceeds 100%, like markets of Russia and Ukraine. You can find a more detailed analysis of company’s operating results you can find at page 2.
MTS’ financial results appeared to be better than our expectations. Particularly, we have had an overly pessimistic estimation of revenue (the current results have exceeded our expectation by +2.5%). Moreover, we have also forecasted poor results of OIBDA margin, expecting its slight fall. Thus, we see MTS’ results as positive for company’s securities.
We have reviewed company’s model, taking into account the operating and financial results of published report. Reviewing a fair price of MTS’ stocks and we have raised it to 19.59 USD per share (+20% growth vs the previous estimation). Company’s ADR estimation was increased to 97.94 USD per share. The current growth potential of ADR price forms +74.1%. It should be mentioned that the given estimation was made in view of “normal” market conditions. It means: the absence of political and war risks, negative situation, concerning Mechel and also warfare in Caucasus region, which had caused a fall of Russian stock market. However, it is hard to predict such situations, but they have a ruinous influence on Russian stock market.
MTS: The art of subscribers’ activity stimulation - August 14, 2008 (PDF)