Orange Polska – Improving Debt Situation & Cost Cuts
Shares in Orange Polska have gained 30.8% since the beginning of the year, outperforming the WIG index by 36.6pp, but we still see upside potential in the Company stemming from an improving debt situation with the ratio of net debt (ex. IFRS16) to EBITDAaL at 2.2x as of 30 September. Orange has more than PLN 1bn-worth of real estate earmarked for sale, and it can capitalize on good economic momentum to effectively monetize the assets as a mitigating factor ahead of next year's 5G auction. Further, Orange is in the process of cutting operating costs; the Company has just entered into downsizing talks with unions in a bid to cushion the negative impact on earnings of rising costs of labor and energy. We expect to see 4.1% growth in 2020 EBITDaL, and we hope Orange will unveil more cost-cutting initiatives at the beginning of next year. Last but not least, Orange has recently confirmed that it was scaling back investment in FTTx infrastructure, and at the third-quarter earnings call its top executives, unprompted, addressed the topic of dividends. Our updated 9-month price target for OPL at PLN 7.40 implies upside potential of 14.6% and an accumulate call. At 5.1x 2019E EV/EBITDA, the Company is currently trading at a substantial discount to its regional CEE peers as well as Western European telecoms.
Orange Polska SA is a supplier of telecommunications services in Poland. Co. provides services, including fixed-line telecommunication services, Integrated Services Digital Network, voice mail, dial-up and fixed access to the Internet and Voice over Internet Protocol. Co. is one of Poland's three DCS 1800 and GSM 900 mobile telecommunications providers. Co. provides also third generation UMTS services. In addition, Co. provides leased lines, radio-communications and other telecommunications value added services, sells telecommunications equipment, produces electronic phone cards and provides data transmission, telephone directories, multimedia services and various Internet services.
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),
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- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
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