O2 Czech Republic: The burden of the (regulatory) crown (downgraded to HOLD – transfer of coverage)
We transfer coverage of O2 CR, with a downgrade to HOLD (from Buy), and cut our price target (PT) to CZK 260/share (from CZK 321), offering 13% upside potential. We like O2’s dividend story (9% yields in 2019-21E), but do not believe it is enough for us to remain buyers of the stock in the face of regulatory and competition headwinds, such as: 1) regulatory pressure on mobile services prices; 2) the near-certain entry of a new mobile player, with the upcoming 5G auction; and 3) new convergent players emerging in both of O2’s markets. Moreover, after including the upcoming 5G tender capex (CZK 2bn in 2020E) and expenditure on exclusive TV content in our forecasts, inter alia, we have raised our 2019-20E capex from CZK 2.3-2.4bn to CZK 4.5-6.6bn. This has resulted in a FCF cut of 25-60% to CZK 4.5-2.7bn (a 6-4% FCF yield vs. its 7-8% peers’ median). Our forecasts imply 7.1-7.2x 2020-21E EV/EBITDAs, 33-41% premiums vs. its peers (vs. its past two-year average premium of 53%).O2 Czech Republic is a provider of voice, data and other telecommunications services in the Czech Republic. Co. provides telephony services to business and residential customers, operates pay phones, provides cellular phone services, euroISDN, leased lines, Internet and data services (including internet online ISDN services which offer digital connection to the internet network), telephone equipment and other services. Co. comprises two main business segments: the Fixed segment which is telephone services using the fixed telephone network and the Mobile segment which is mobile telephone services provided by Telefonica O2 Slovakia.
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.
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.