Cyfrowy Polsat – High FCFE, Sound Dividends
We revise our outlook on Cyfrowy Polsat to account for the expected consequences thus far of the current epidemic. When it comes to the telecom business, the key risks we see as facing the Group at the moment include increased network traffic, potential customer losses, weaker sales of electronics due to low demand exacerbated by quarantine store closures, and reduced use of international roaming. As for the more volatile media business, the main risk here is the likely fall from Q2 2020 in advertising expenditures as businesses cut back costs amid an economic crisis. Our base-case scenario for Cyfrowy under these circumstances assumes a 4.5% decline in EBITDA ex. IFRS16 in 2020 – a forecast which is subject to change as the situation develops and depending on the duration of the epidemic. After updating our models, we set our new target price for CPS at PLN 24.10, and we recommend holding the stock despite currently having an overweight view on the telecoms sector. Cyfrowy offers high FCFE Yield (8.5% in 2020 not including frequencies, over 10% in 2021) and pays healthy dividends (DivYield’20 = 3.9%) – a treat at a time of low interest rates. On the other hand, the Company currently trades at a premium to its local telecom peers at 6.9x EV/EBITDA vs. 6.1x Play and 5.2x Orange Polska. An uncertain advertising outlook is no doubt a source of downside risk for Cyfrowy, however in terms of earnings impacts keep in mind that ads account for less than 15% of annual EBITDA.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
- Engage in our many industry events, featuring listed Polish and global firms (in 2018, we hosted sector-themed conferences around industrials, chemical companies, telecoms, retail, and financials, and co-hosted a Best of Poland investors' with Commerzbank and the Warsaw Stock Exchange),
- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
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