Rostelecom: The new Rostelecom - convergent & digital (upgraded to BUY)
We have upgraded our rating for Rostelecom (RTKM) to BUY, from Hold, and increased our 12-month price target (PT) from RUB 73.9/share (USD 6.7/ADR) to RUB 117.7/share (USD 9.7/ADR), implying 20% potential upside (23% for the ADRs). RTKM offers strong exposure to the Russian economy digitisation trend, which has been accelerated by the COVID-19 pandemic, resulting in compelling 66% yoy growth in digital services sales in 1H20. We expect the performance of the segment to remain strong in the forecast period (33% 2019-22E CAGR). This, paired with the strong momentum of Tele2 (12% 2019-22E mobile sales CAGR), and the cost-optimisation programme, should result in an impressive 2019-22E OIBDA CAGR of 10%. Moreover, in our opinion, due to the recent consolidation of Tele2, RTKM deserves some multiples rerating. It currently trades at a 2020E EV/EBITDA of 4.2x, while we would consider 4.8x (as implied by our SOTP valuation) to 4.9x (MTS) as fair.Rostelecom PJSC provides communication services (including local, intra-zone, long-distance domestic and international fixed-line telephone services, mobile services), data transmission, Internet, Pay TV, VPN and data centers services, rent of communication channels and radio communication services in the territory of Russian Federation. Co. operates the main intercity network and the international telecommunications gateways of the Russian Federation, carrying voice and data traffic that originates in its own network and other national and international operators' networks to other national and international operators for termination.
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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