Digi Communications confirmed at BUY, TP RON 47 - Just keeps growing, and growing, and growingÂ…

The news flow was overwhelmingly positive since our last update in October. Digi continued its aggressive growth strategy in 4Q 19, announcing a potential new acquisition in Romania which could add another 540 k RGUs, mainly in fixed services. The Spanish business is also expanding faster than we previously expected, closing to 2 mn RGUs. 3Q 19 results confirmed the positive trend in margins in Romania, where EBITDA margins gained more than 100 bps, excluding one-offs and IFRS 16 impact. The competitive landscape in Romania remains supportive for Digi improving its market share. Telekom is still trying to sell fixed services to Orange, but the deal is blocked by the state and the new Government showed no signs that a decision could be made soon. Moreover, Telekom plans another price increase in the coming months and Vodafone is still working on the integration of UPC Romania, thus we see Digi seizing the moment to consolidate its already dominant position in fixed services. The media also reported tough negotiations between Digi and Telekom for the latters mobile business, but we believe that the postponement of the frequency auction has lifted the time pressure on the seller. Putting all this into numbers, we upped our 12m TP from RON 40 in our previous update to RON 47, and we confirm our BUY recommendation.