Analyst Research Report Snapshot

Title:

PTC_1HCY13 detailed accounts update & outlook, (AKD Daily, Sep 04, 2013)

Price:

$46.00

Provider:

AKD Securities Limited

Date:

04 Sep 2013

Pages:

5

Type:

AcrobatPDF

Companies referenced:

PTCA.KA

Available for Immediate Download
Summary:

PTC: 1HCY13 detailed accounts update & outlook PTC posted consolidated NPAT of PkR7.9bn (EPS: PkR1.54) in 1HCY13, up by a healthy 15%YoY with profitability growth underscored by strong rebound in profitability of standalone operations. In this regard, standalone (SA) profitability for 1HCY13 stood at PkR6.3bn (EPS: PkR1.23), up by 44%YoY. Moreover, Pakistan Telecom Mobile Ltd. (Ufone) has pre-paid its entire bank debt of PkR20.5bn in 2QCY13 and in the process has deleveraged the balance sheet. While we have reduced our CY13F consolidated earnings estimates by 9% mostly due to reduction in our int'l monthly incoming minutes assumption for 2HCY13, we maintain our 'Buy' stance on PTC, which offers an upside of 25% to our revised TP of PkR32/share. . 1HCY13 result review: PTC posted consolidated NPAT of PkR7.9bn (EPS: PkR1.54) in 1HCY13, up by a healthy 15%YoY with profitability growth underscored by strong rebound in profitability of standalone operations. In this regard, standalone (SA) profitability for 1HCY13 stood at PkR6.3bn (EPS: PkR1.23), up by 44%YoY driven by 31%YoY expansion in topline and a 10.1ppt expansion in GMs to 34.5%. Robust growth in fixed line operations made up for sluggish performance from the cellular operations (flattish revenues, declining margins) where cellular operators have been hit hard by increasing grey traffic post ICH. For 2QCY13, consolidated earnings were up by 36%QoQ to PkR4.5bn (EPS: PkR0.89) while SA profitability registered at PkR3.4bn (EPS: PkR0.66), up 16%QoQ. Importantly, SA revenues were up 6%QoQ despite sequential slowdown in international incoming minutes owing to robust growth in the broadband category. PTML deleverages: Pakistan Telecom Mobile Ltd. (Ufone) has pre-paid its entire bank debt of PkR20.5bn in 2QCY13 and in the process has deleveraged the entire balance sheet. We believe that there are a number of factors which could be contributing to the deleveraging which include i) using excess cash balances to retire LT debt, especially given the possibility of monetary tightening going forward and ii) making balance sheet space for major acquisitions (possibly Warid Telecom) and fresh borrowing for 3G license. Tweaking our CY13 estimates: We have reduced our CY13F consolidated earnings estimates by 9% to PkR18.6bn (EPS: PkR3.64). Earnings have been tweaked on account of i) reduction in our int'l monthly incoming minutes assumption for 2HCY13 to 600mn from the previous 750mn, ii) adjusting for the recent increase in fuel prices (fuel & power account for ~6% of Cost of Services) and iii) recent depreciation in PkR, which will increase FCY denominated costs. One of the cheapest telecom plays: PTC is one of the cheapest telecom plays in the Asia Pacific region, trading at steep discounts to sector median P/E and EV/EBITDA. We believe that multiples have room for further catch up given robust digit earnings growth (3-yr CAGR of 52%) and healthy dividend yield. We maintain our 'Buy' stance on PTC, which offers an upside of 25% to our revised TP of PkR32/share.

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