OTE: All about total return (BUY - transfer of coverage)
In this report, we transfer coverage of OTE and upgrade our rating to BUY (from Hold), with our price target (PT) raised to EUR 15.6/share (from EUR 12.3), implying 16% upside potential. We rate OTE a BUY as we appreciate its attractive investor remuneration (c.6% in 2019-21E), growth outlook (2018-21E adjusted EBITDA ex.IFRS 16 CAGR of 3%), and the supportive Greek macro environment (CIT rate cuts, falling interest costs). A potential trigger for the stock is the rumoured sale of its Romanian segment, the proceeds of which might be used for a special dividend. Our forecasts imply 5.5-5.3x 2019-20E EV/EBITDAs, 8-11% discounts vs. its peers. However, we believe that OTE deserves a premium due to its attractive remuneration (6% in 2019-20E vs. its peers’ 5% and the 1.2% 10Y Greek bond yield) and FCF yield (c.8% in 2019-20E vs. its peers’ 7%).Hellenic Telecommunications Organization is a full-service telecommunications group. Co. provides local, long-distance and international fixed-line telecommunications services in Greece and Romania, and mobile telephony services through its Cosmote subsidiary in Greece, as well as in Albania, Bulgaria, the Former Yugoslav Republic of Macedonia and Romania. Co. also provides internet access services and Internet Protocol (IP) -based telecommunications applications, as well as information technology application development and hosting services using IP technologies. Also, Co. provides several other telecommunications services, including value-added services and public telephone services.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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