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Morningstar | Millicom Lists Sponsored ADR on Nasdaq Under Symbol TIGO, Shares Undervalued

On Jan. 9, we attended Millicom’s analyst meeting held in conjunction with the listing of its ADR shares on the NASDAQ stock market under the symbol TIGO. Tigo is the brand name it uses in its operations in Latin America. It also changed the symbol of its local shares in Sweden from MIC SDB to TIGO SDB. The existing unsponsored pink sheet ADRs continue to trade under symbol MIICF. However, the new sponsored shares are expected to be more liquid and investors will be able to easily get quotes through the trading day. During the meeting, the firm announced it slightly exceeded the high end of its projected 2018 service revenue growth rate of 2%-4% and slightly beat the low end of its EBITDA growth rate of 3%-6%. Management also announced its 2019 objectives of service revenue growth of 3%-5% with EBITDA growth of 4%-6%. As these numbers are generally in line with our expectations, we don’t expect to change our fair value estimate of $86 per MIICF ADR. Our narrow moat rating remains. We continue to believe the shares are undervalued.

The meeting allowed analysts to hear from a number of country level managers as well as the chairman, CEO, and CFO. These presentations demonstrated the quality of the management team beyond just the senior officers. Overall, management is quite bullish that the firm’s investments over the past several years are beginning to pay off and the strong third-quarter results were not a fluke. We have long stated that the stock was undervalued and the investments and cost-cutting the firm was going through would pay off with a return to revenue growth and EBITDA margin expansion. While we have periodically seen signs of this, the recovery hasn’t been as consistent as we would like. Management’s objectives assume constant currencies, and several currencies weakened during the fourth quarter. Thus, the reported numbers in dollars may be a bit weak. Nonetheless, we came out of the meeting more confident that our long-term thesis is intact.