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Veles Capital maintains "buy" recommendation on Uralsvyazinform 11 September 2008 Source: www.veles-capital.ru
With the given research we finish issuing fair estimations to a range of Svyazinvest IRCs, which published their consolidated financial results for last year. Uralsvyazinform’s results over the year can be characterized as neutral. The company demonstrated average revenue growth rates (in comparison with other IRCs). The main growth drivers of revenue were – increased tariffs on local communications, intrazone connections due to CPP, cellular incomes (the number of company’s subscribers increased by 16% over the year) and also due to a development of new services. Over the year OIBDA margin of Uralsvyazinform increased by 5 p.p., excluding the other results, it can be characterized as a positive moment. Moreover, Uralsvyazinform has its share of unregulated services in the revenue structure. Meanwhile, in spite of positive dynamics of some company’s results, Uralsvyazinform had some negative moments as well. Thus, according to 2007 results, ROIC formed 8.3% – the lowest result among companies of the sector. Moreover, OIBDA margin totaled 32%, which is the worst result among IRCs. Another negative moment – a high debt load rate – Uralsvyazinform’s net debt exceeded 1 bn USD late last year, whereas the company takes one out of 3 places among IRCs with highest debt load rate. We have reestimated Uralsvyazinform’s stocks, taking into account published data. Our new estimations are: 0.0459 USD per common share and 0.0344 USD per preferred share. Our previous estimations were: 0.0573 USD and 0.0430 USD respectively. The main reason of the fall – a significant growth of investment program for next several years. Today Uralsvyazinform’s shares reached the minimum level over 5 years. Thus, in spite of our conservative estimation and a fall of company’s stocks, they have a strong growth potential, which can be implemented, when the problems at Russian stock market will be solved. We confirm our “BUY” recommendation on both types of Uralsvyazinform’s securities. |
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