DIGI - Too cheap to ignore!
We increase our TP to RON 60 per share and lift recommendation to BUY from
Neutral after the huge proceeds lowers debt level significantly. After 22 years in Hungary,
DIGI divested its Hungarian operation for an extraordinary price of EUR 625 million implying a
12x EV/EBITDA (vs DIGI’s or MTEL’s 3.5x-4.3x EV/EBITDA). To put this amount into
perspective, DIGI’s pre – announcement market cap was only EUR 700 million. With the
transaction DIGI’s EV/EBITDA multiple falls back to 3.2x becoming one of the cheapest telco
in the EU.
While we see limited probability for large cash distribution and rather expect DIGI to
reduce its debt level and fund its growth strategy, with the incoming proceeds DIGI has
become simply too cheap to ignore. Also please note that DIGI distributed EUR 15 million
(DY: 1.7%) dividend last year only. Therefore even a miniscule portion from the proceeds
(EUR 625m) could increase dividend significantly.
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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