Magyar Telekom: High quality for a low price (upgraded to BUY)
We have upgraded Magyar Telekom (MTelekom) to BUY, and raised our price target (PT) to HUF 546/share (from HUF 491). We see the company as a high-quality telco, in terms of both the services offered and the management, and one which is considerably underrated by the market. On our forecasts, it trades at 2021-22E EV/EBITDAs of 3.5-3.6x, 31-26% discounts to its peers. Moreover, it has an organic FCF yield of c.16-17% in 2021-22E vs. its peers’ median of c.9%. The market might have assigned some discount on the back of the risk of DIGI disrupting the HU mobile market and MTelekom’s uncertain dividend policy. We believe this is unjustified, however, and consider both factors irrelevant for the equity story: we expect DIGI to remain a niche mobile operator in Hungary; and we believe the dividend should get back on track with the medium-term spectrum payments schedule now known (with a c.7% DY in 2021-22E, on our estimates).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.).
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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