Cyfrowy Polsat – Undeserved premium to peer group
Over the last 5 months the shares of Cyfrowy Polsat climbed by more than 15%, outpacing the market by nearly 19 percentage points. At the same time, the company announced a dividend payout, which is positive news (in fact, we had been expecting it for a long time). On the other hand, (1) its current DivYield at 3.6% is low in comparison with the peer group (DivYield’19 median for peer group stands at 5.4%) and with the rival PLY PW (DivYield’19 = 5.8%). (2) Moreover, net of the impact of Netia’s consolidation and IFRS 16, EBITDA shrank by 6.0% YoY, which came as a disappointment. Despite the above, the company is trading on EV/EBITDA’19 = 6.6x at an over 10% premium to the peer group, which we find undeserved. We estimate EBITDA to stand at PLN 3.75 billion under IAS 17, down by 2.4% compared with the 2018 pro forma figure. This makes Cyfrowy Polsat the only of the three major Polish telecoms to see its earnings drop (vs PLY +7.1%, OPL +2.4%). The decline is attributable not only to Netia but also to the sluggish advertising market (in Q1 2019, spending on TV advertising and sponsorship in Poland fell by 3.1%). Consequently, we updated our forecasts (among others, with the impact of IFRS 16) to arrive at a revised target price of PLN 24.60, which implies that the share price may potentially slide by more than 5%. In our opinion, Play is a more attractive choice in the sector.
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