Jul
16
STC: The connected south - July 16, 2008
Filed Under Bullet-moments |
Earlier this July STC published its financial results of 2007 under IAS. Company experienced a range of evident improvements; however, the previous fears are still haunting the company.
Amongst the pluses we point out the growth of annual sales up almost +20%. And traditionally – local telephony was not the primary driver of income growth, as it happens with other IRCs nowadays. The primary reason for income growth to expand was a high number of subscribers, lacking the technical ability to choose the tariff plan, which negated company’s chance to fully benefit off changes in the industry. Starting with this year the number of subscribers able to choose from different tariff plans has been expanded, which could provide additional influence upon the sales of STC.
The development of new services continues to prove positive support upon the income of STC – broadband subscribers base of the year rose over two times, to 167 th subscribers, leading to growth of income off new services up 1.7 times. This year company expects the doubling of number of subscribers.
Do remember that STC is one of the least successful out of other IRCs from debt load standpoint. During past year STC’s net debt in USD value increased +5.4% and formed 837 mn USD. However, due to growth of OIBDA and net income the ratios to indicate the debt load are improving, constantly and steadily. Note though, company may continue to expand the portfolio required to finance announced investment program. However, versus other IRCs, STC’s planned CapEx of next five years seem rather “humble” – 29 bn RUR. Nevertheless, even this value would be hard to get for STCs – as company is still obliged to pay up its old debts and for next two years STC will require about 500 mn USD in order to cover existing long-term debt.
Today we renew our financial model of STC, adding events of past half of year. With new data in mind we upgrade our fair price of STC +2.5% to 0.2526 USD on common stocks and 0.1895 USD on preferred (previous estimates 0.2465 USD and 0.1848 USD respectively). Since the year’s start stocks of STC have some +30% of value, which intends considerable growth potential. Therefore we confirm “BUY” recommendation on both share types of STC.
STC: The connected south - July 16, 2008 (PDF)