Netia - 3Q19 results’ forecasts
Even though Netia is the leading alternative fixed line and broadband operator in Poland which has strengthened its market position through the consolidation of the Polish telco market encompassing the acquisitions of Tele2, Dialog, Crowley and TK Telekom, its organic growth potential is limited on the back of the market price war translating into (i) acceleration of churn, (ii) pressure on ARPU, and (iii) growing technical requirements regarding providing higher speed Internet access. In order to face the demanding market environment Netia decided to launch a robust investment program (PLN 417 million of additional capex for FTTH technology) so to be able to compete with CATVs and Orange PL.
We have never perceived Netia as an active market consolidator solely, but also as the company, which may become a needed ‘valuable piece of a puzzle’ for another operator in order to introduce the fully convergent service. This scenario materialized as Cyfrowy Polsat announced and successfully executed a tender offer for 66% of Netia’s shares outstanding at the price of PLN 5.77 per share. On the other hand, tender for the remaining 33% shares is likely to take place rather later than sooner due to few reasons (i) 5G tender (Cyfrowy Polsat needs to secure funds to obtain the new spectrum), (ii) dividend policy and (iii) current level of debt outstanding. The price of PLN 5.77 per share is no longer obliging (12M have already passed since the first tender) as a result investors should look towards 3M and 6M average price of Netia’s shares, in our view.
Given our 12M EFV residing below the current share market price and the 3M and 6M average price of Netia @ PLN 4.58 (6% downside) and PLN 4.63 (5% downside) per share respectively, we maintain our LT Sell fundamental recommendation for Netia’s shares. As we do not expect the quarterly results to become any price setter in the coming quarters we keep our ST Neutral market-relative stance for Netia’s equities unchanged.
Netia Holdings is a fixed-line telecommunication operator based in Poland. Co. provides voice telephony and data transmission services. These services include switched, fixed-line voice telephone services (long-distance and fixed-to-mobile services), Integrated Services Digital Network, Voice over Internet Protocol, voice mail, dial-up and fixed-access Internet, leased lines and frame relay and MPLS services. Co. also offers wholesale services (including wholesale termination of inbound traffic, ducts, dark fiber and co-location), services based upon intelligent networks (free phone, split charge and premium rate services) and provides broadband Internet access with ADSL technology.
BOS Brokerage, with over 20-year experience, offers brokerage services on the Polish capital market to satisfy numerous needs of institutional and retail investors.
Our comprehensive offer includes brokerage services on both the stock exchange and the forex market as well as brokerage services on the energy market, debt and equity issues, distribution of investment funds and assets management.
BOS Brokerage analytical team belongs to the most appreciated and acclaimed on the market. According to Parkiet daily’s poll (as of January 7, 2019), DM BOŚ equity research team was selected by institutional investors as the third best in Poland. Moreover, the team members won several individual best analysts awards, including Sobiesław Pająk – IT (best analyst), media/telco (ranked 2.), strategy (ranked 4.), Tomasz Rodak – video games (best analyst), overall ranked 5., Łukasz Prokopiuk – chemicals (ranked 2.), mining (ranked 3.), Maciej Wewiórski – real estate (ranked 3.).
In August 2017 Parkiet daily indicated DM BOŚ recommendations as the most accurate over 12 months and according to the Puls Biznesu daily (as of April 11, 2017) DM BOŚ research team was the most prolific on the Polish market and issued the biggest number of recommendations (247) in the years 2014-2016.
The analysts handle over 80 companies listed on the Warsaw Stock Exchange.
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