Magyar Telekom - Higher employee expenses spoiled the game in Q3 - Instant Earnings comment from Concorde Ltd. (Hungary)
Magyar Telekom – Instant Earnings Comment
Recommendation: Buy
Target price (12M): HUF 540
Higher employee expenses spoiled the game in Q3
- In short: Magyar Telekom could only beat top line consensus (by 1%), EBITDA (-1.4%) and profit (-12%) estimates were missed. The same story continues as in last quarter, shift to lower margin segment (equipment sales) dilutes EBITDA margin which stands at 32% in this quarter but this time employee related expenses increased significantly (+9% y-o-y). Additionally, there were two one-off gains in 2017Q3 which are missing in 2018 (one is related to revenues related to FINA World Championship and the other is a realized gain on real estate sale) explaining ca. HUF 1 billion EBITDA. There was no change in FY guidance.
- Revenue increased to HUF 164 billion (+5% y-o-y) and slightly beat the consensus of 162 billion (+1%). Sales were fuelled by the two similar segment as in Q2, equipment sales (+28% and 120% on mobile and fixed line revenues) and strong SI/IT +20% y-o-y.
- EBITDA came to HUF 53 billion (-7% y-o-y; missed consensus by 1.4%) on the back of higher share of low margin segments in the sales mix and the missing two one-offs (estimated to ca. 1-2 billion attributable to FINA World Championship and realized gain on sale of a real estate sale) and last but not least on higher employee expenses. Because of the low margin segments, and higher employee costs EBITDA margin soften to 32% vs. 36%. On the cost side, direct cost shot up by 20% due to lower-than a year ago SI/IT margins and the cost of equipment sales. Regarding the fixed costs, employee-related expenses grew by 9% y-o-y to HUF 20 billion due to general wage increase (+5% y-o-y ) and higher severance expense related to changes in the organization structure which was mitigated by some savings in maintenance and energy expenses (-10% y-o-y).
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.