MTS - BUY Reiterated; Dividend Attractive
We reiterate our BUY recommendation for MTS and lift our DCF-derived target price by 10% to $11.00 on an upward earnings revision triggered by stronger than expected 1H19 results and increased guidance for 2019. MTS ADRs are trading at an attractive 2020E EV/EBITDA of 3.6 and P/E of 6.7 and an expected dividend yield of 11.3% (although we estimate about 70% of this will be paid in July 2020). We expect EBITDA and net income from continuing operations to grow at a CAGR of around 4% in 2018-21E. We estimate that net debt (with capitalized leases)/EBITDA will approach 2.0 at the end of 2019, up from 1.8 in 2018.Mobile Telesystems is a provider of mobile cellular communications services in the Russian Federation, Ukraine, Uzbekistan and Turkmenistan to consumers and corporate customers, employing technology based primarily on Global System for Mobile Communications (GSM). Co. had a mobile subscriber base of around 102.5 million (77.3 million in Russia, 20.4 million in Ukraine, 2.1 million in Turkmenistan, 1.6 million in Uzbekistan and 1.1 million in Armenia). In addition to standard voice services, Co. provides improved services, including voice mail, short message service, general packet radio service, and various SMS- and GPRS-based information and entertainment services.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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