Equity
ANALYST VIEW - Nomura lowers target price for Hungary's Magyar Telekom
“Although MTEL's 2009 result was broadly in line with expectations, forward guidance was on the bearish side of consensus," analysts Viktor Shvets and Jean Kaplan said in a research note on Friday.
MTEL expects a 5-7% drop in adjusted revenue and EBITDA. “This is driven by a combination of continuing headwinds in consumer and corporate space as well as highly intense competition in Hungarian broadband and wireless. We have lowered our estimates by around 2%, thus reducing our DCF to HUF 760," they added.
“Although at the current price, the shares are not expensive (FCF yield-12.5%) and unlike last year, we view guidance as conservative, there is little momentum. In the context of CEE, we continue to prefer MTEL to Tel O2 and TPSA to MTEL."
Nomura’s TP was derived using a DCF-based sum-of-the-parts methodology with a WACC of 12% and a terminal growth rate of 1% for wireline and 2% for wireless assets.
Shvets and Kaplan identified several risks that may impede the achievement of the target price. “The key risks are a faster-than-anticipated decline in IT and corporate revenues in response to the economic slowdown as well as regulatory changes regarding MTR, ULL pricing and platform separation. Other risks include accelerating FTTH investments and the likely pay-back period as well as potential expansion outside the core Hungarian market," they said.
MTEL expects a 5-7% drop in adjusted revenue and EBITDA. “This is driven by a combination of continuing headwinds in consumer and corporate space as well as highly intense competition in Hungarian broadband and wireless. We have lowered our estimates by around 2%, thus reducing our DCF to HUF 760," they added.
“Although at the current price, the shares are not expensive (FCF yield-12.5%) and unlike last year, we view guidance as conservative, there is little momentum. In the context of CEE, we continue to prefer MTEL to Tel O2 and TPSA to MTEL."
Nomura’s TP was derived using a DCF-based sum-of-the-parts methodology with a WACC of 12% and a terminal growth rate of 1% for wireline and 2% for wireless assets.
Shvets and Kaplan identified several risks that may impede the achievement of the target price. “The key risks are a faster-than-anticipated decline in IT and corporate revenues in response to the economic slowdown as well as regulatory changes regarding MTR, ULL pricing and platform separation. Other risks include accelerating FTTH investments and the likely pay-back period as well as potential expansion outside the core Hungarian market," they said.
