Cellnex: New LT assumptions - raise to Neutral
Our negative view on Cellnex (CLNX) was mostly driven by issues that affected its long-term prospects, namely uncertainties over the transition to 5G and more importantly our assumptions on anchor tenants’ contract pricing. We have taken a new approach to this last aspect. Although we maintain our view that there should be a drop in their pricing, thus some convergence towards secondary tenants contracts, we are no longer considering full price convergence on these contracts given we think the existing mechanisms in these agreements prevent such a possibility. As such, our revenue and EBITDA numbers enjoy a substantial upgrade in the outer years of our forecasts (by 2050E revenues and EBITDA are up 58% and 77%, respectively); as a consequence we increase our FV from €14.3 to €25.0 and we upgrade the shares from Sell to NEUTRAL. We see CLNX shares fairly valued; on the one hand we see high resilience to downside risks, namely the fact that higher interest rates risks are naturally hedged by inflation adjusted contracts and the fact that the long-term nature of the contracts provides good visibility on the pipeline. On the other hand, we do not think valuation is compelling enough and on top of that we are 6% and 11% below 2019E/20E EBITDA consensus, likely capping the upside potential. In this report we are transferring coverage to Nuno Matias.Cellnex Telecom SA is a Spain-based company engaged in the wireless telecommunications (telecom) business. Its activities are divided into three segments: Broadcasting infrastructure, Telecom site rental, as well as Network services and other. The Broadcasting infrastructure division comprises distribution and transmission of television (TV) and frequency modulation (FM) radio signals, operation and maintenance (O&M) of radio broadcasting network, as well as over-the-top (OTT) radio services, among others. The Telecom site rental division provides access to wireless infrastructure, primarily through infrastructure hosting and telecom equipment co-location, mainly for mobile network operators and other wireless and broadband telecom network operators. The Network services and other division offers connectivity services for a variety of telecom operators and radio communication, among others. The Company also develops 5th generation mobile networks (5G) through Alticom BV.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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