Play – Improving Fundamentals, Stable-To-Rising Dividends
Shares in Play have gained 15.2% since our last update on 12 September, rising, as we had predicted at the time, on strong third-quarter results and an upgraded FY2019 guidance. At PLN 900+ million, the updated FCFE target in our view mitigates the risks associated with dividends and next year's 5G auction. In our conservative baseline scenario where it has to spend an extra PLN 1.2bn on frequencies, Play will pay dividends of PLN 1.45 per share next year. In a more optimistic scenario assuming frequency spend of PLN 800m, the payout might be 25% higher. Aside from an improving balance-sheet position, another reason why Play should continue to gain in value in our view is the improving situation in the Polish mobile market, reflected in assurance given by the Company and rival Orange Polska that their recent price hikes have met with no resistance from end users. Consumers are prepared to pay higher prices for their mobile plans amid continuing rapid growth in mobile data usage (32.2% y/y in Q3’19), combined with accelerating price inflation. We have raised our earnings expectations for Play, and on the updated estimates we set our new price target at PLN 36.00, indicating upside potential of 15%. Play is a better pick at the current level than the rival telecom Cyfrowy Polsat.
Play Communications SA Formerly known as Play Holdings 2 SARL. Play Communications SA, formerly Play Holdings 2 SARL, is a Luxembourg-based provider of financial investment services. The Company is the owner of mobile operator P4 Sp z o o, that provides a wide range of mobile telecommunications services, including voice, data transmission services, messaging, video service (PLAY NOW), as well as Value Added Services and sales of handsets and other devices, to individual and business subscribers in Poland.
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