Mobile TeleSystems: Quality doesn’t come cheap (downgraded to HOLD)
We have downgraded our rating for Mobile TeleSystems (MTS) to HOLD, from Buy, and increased our 12-month price target (PT) from RUB 336/share (USD 10.1/ADR) to RUB 388/share (USD 10.3/ADR), implying 12% potential upside (8% for the ADRs). We see MTS as good exposure to the strong Russian mobile market, and appreciate its commitment to providing investors with high shareholder returns (reaching 11% in the next three years vs. the c.6% peers’ median). However, its current valuation does not leave much space for further rapid share price appreciation as, on our forecasts, MTS trades at 2020-21E EV/EBITDAs of 5.6-5.3x, at 6-2% premiums vs. its peers. In the Russian telecoms space, we prefer Rostelecom (BUY, PT RUB 117.7), which trades at (unjustified, in our view) 25-27% discounts to MTS on 2020-21E EV/EBITDAs, while also offering exposure to the Russian economy’s digitisation trend, which has been accelerated by the COVID-19 pandemic, and which should result in an impressive 2019-22E OIBDA CAGR of 10% (vs. MTS’s 3.7%), on our forecasts.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.
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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