Equity
Hungary Magyar Telekom could report lowest sales in 16 years
What should we expect for Q1?
By the end of March, we should see energy retail profits all but gone from MTel’s numbers, and System Integration/IT are also unlikely to have posted massive profits, not to mention that the group has also exited Montenegro.It is mainly due to these factors why analysts expect MTel’s revenues and EBITDA to be lower than in the base period. Total sales are projected at HUF 139.4 billion, which would be the lowest quarterlz revenue since 2001.
Items of interest in the earnings report
A key question is whether MTel’s management will raise their dividend proposal or not. The operating environment is basically favourable and it seems rival Digi will not launch its mobile services this year either. It is partly over the latter factor why MTel has been cautious with its dividend policy.Management caused quite a surprise this February when they announced the plan to pay HUF 25 dividend per share from 2017 profits, unchanged from 2016., whereas the group’s free cash flow offers room for much higher DPS. We find it highly unlikely that the dividend forecast will be changed now.
We would also like to see if MTel’s management change this year’s guidance or not. The public guidance revealed in February targets 2.4% yr/yr erosion in sales and 3.2% in EBITDA, whereas if analysts’ expectations prove to be correct, total sales will decrease by 3.9% and EBITDA will plummet by 19%. Although figures for the first three months of the year do not create a solid basis for reliable prognoses, management may be spurred by the Q1 readings to fine-tune those targets.
