Magyar Telekom-Bullish case delayed by a few years
- We downgrade MTEL from BUY to Accumulate and decrease our Target Price from HUF 560 per share to HUF 440 per share because of the higher rate environment, the recently imposed tax on “windfall profit”, but more importantly the uncertainties regarding the duration of that new burden.
- The Hungarian government levied a HUF 25 billion extra tax on Magyar Telekom (ca. 42% of last year’s profit and 35% of guided FCF). Albeit the government indicated that this extra tax would last 2 years only, we are sceptical about that. If it does really last for two years, the effect of the windfall tax is ca. HUF 48 per share, however if investors assume that it will remain as a perpetual burden on MTEL then the effect should be around HUF 240 per share.
Magyar Telekom is engaged in the providing fixed line and mobile telecommunication services for public and business customers. Co. provides voice and non-voice (SMS, MMS, internet, data and content provision) within mobile services; voice, data, internet and TV services within fixed line services. In addition, Co. sells equipment needed for using fixed line and mobile services (telephones, tablets, notebooks, TV sets etc.).
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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