Magyar Telekom raised to BUY, HUF 427 - The punishment for the approach to dividends is too severe
We update our operating forecast for Magyar Telekom. We lower the TP to HUF 427 from HUF490 while upgrading our recommendation to BUY from HOLD. The share price has declined by ca. HUF90 since the outbreak of Covid-19 in Europe. In our view, the lack of dividend policy and a history of taking a cautious approach to shareholder remuneration is the main reason for the weak performance of the share price despite the telecom industry offering a relatively safe haven in the wake of the pandemic. After delivering a decent set of 2Q results and confirming its FY 20e EBITDA guidance, we believe that the shares are fundamentally undervalued even after having applied a 10% discount in our valuation for the lack of dividend policy. We believe that management will give reasons (such as another looming spectrum auction and market uncertainties) to continue its frugal approach to shareholder remuneration (DPS20e of HUF 20, i.e. 31.7% of FCF). Nevertheless, we consider the investment case as attractive at these levels: 1) MTEL is well positioned to take advantage of increasing data usage both in mobile and fixed-line, 2) we consider the threat of Digi in mobile as decreasing, 3) MTEL trades at a 25% discount to CEE peers on EV/EBITDA 20e.Magyar Telekom is engaged in the providing fixed line and mobile telecommunication services for public and business customers. Co. provides voice and non-voice (SMS, MMS, internet, data and content provision) within mobile services; voice, data, internet and TV services within fixed line services. In addition, Co. sells equipment needed for using fixed line and mobile services (telephones, tablets, notebooks, TV sets etc.).
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.