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TEO LT is set to release its Q3 results on the 15th of October, 15:00 Vilnius time. The main focus of the upcoming announcement will be broadband sales growth and the extent to which the rise in expenditure remains in check.
We expect the y/y sales growth to be close to +5%, driven by strong growth in internet and other services (IPTV, IT service and equipment sales, ect), at +16% and +11% respectively, with fixed line sales remaining stable at LTL 131M. While a small change in the latter can have a significant momentary impact on the overall sales growth figure, it is the former two factors that will have a lasting effect on the company’s value.
As above growth figures can exercise some degree of variability due various discounts, promotions and other short term impact factors, special attention should be paid to broadband and IPTV subscriber base, which will determine the future revenue growth potential. For broadband, we are expecting a figure of at least 226K subscribers, a +14K increase from the previous quarter, while a 50% variation in this growth figure would correspond to as much as 10% of the total stock value. As for IPTV, we expect the subscriber base to grow by at least +3K, to a total of 14K. 50% variation in the growth rate is estimated to constitute up to 4% of the total company value.
We estimate the company’s operating expenses to be slightly less than the ones of previous quarter, whereas the Q3 figure should be around +6% higher than a year ago, mainly due to increased headcount. This will lead to an EBITDA being some -0.4% lower, with margin down to 44% from a 47% of yesteryear. We therefore expect the q/q margin to remain stable.
If the margins are to be maintained in the future however, expenditure will have to be controlled, a task that will be especially difficult in the light of increasingly inflationary economic environment. Another unexpected leap in expenditure, as witnessed during the previous quarter, would be a signal that hard measures should be taken, if future profitability targets are to be maintained.
We will update our annual estimates and target price after the release of Q3 results.
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Mantas Pakėnas
Kapitalo rinkų skyrius / Capital Markets Unit
DnB NORD Investment Banking
J. Basanavičiaus g. 26, 03601 Vilnius
Tel./phone: +370 5 2393776
Faksas/fax: +370 5 2393783
El. paštas/e-mail: mantas.pakenas@dnbnord.lt
We expect the y/y sales growth to be close to +5%, driven by strong growth in internet and other services (IPTV, IT service and equipment sales, ect), at +16% and +11% respectively, with fixed line sales remaining stable at LTL 131M. While a small change in the latter can have a significant momentary impact on the overall sales growth figure, it is the former two factors that will have a lasting effect on the company’s value.
As above growth figures can exercise some degree of variability due various discounts, promotions and other short term impact factors, special attention should be paid to broadband and IPTV subscriber base, which will determine the future revenue growth potential. For broadband, we are expecting a figure of at least 226K subscribers, a +14K increase from the previous quarter, while a 50% variation in this growth figure would correspond to as much as 10% of the total stock value. As for IPTV, we expect the subscriber base to grow by at least +3K, to a total of 14K. 50% variation in the growth rate is estimated to constitute up to 4% of the total company value.
We estimate the company’s operating expenses to be slightly less than the ones of previous quarter, whereas the Q3 figure should be around +6% higher than a year ago, mainly due to increased headcount. This will lead to an EBITDA being some -0.4% lower, with margin down to 44% from a 47% of yesteryear. We therefore expect the q/q margin to remain stable.
If the margins are to be maintained in the future however, expenditure will have to be controlled, a task that will be especially difficult in the light of increasingly inflationary economic environment. Another unexpected leap in expenditure, as witnessed during the previous quarter, would be a signal that hard measures should be taken, if future profitability targets are to be maintained.
We will update our annual estimates and target price after the release of Q3 results.
-----------------
Mantas Pakėnas
Kapitalo rinkų skyrius / Capital Markets Unit
DnB NORD Investment Banking
J. Basanavičiaus g. 26, 03601 Vilnius
Tel./phone: +370 5 2393776
Faksas/fax: +370 5 2393783
El. paštas/e-mail: mantas.pakenas@dnbnord.lt
