KEY THEMES
Continuing with the Q2 2021 earnings theme, Telecom Egypt [ETEL] has just landed a set of strong figures, with EPS at EGP1.02 (+134% y/y, -18% q/q). While EPS declined sequentially due to lower other income and higher borrowing costs, the stupendous earnings growth from an annual perspective is the result of 13% y/y growth in top-line to EGP8.97bn.
Compared to Q2 2020, top-line performance was decorated by an 18% surge in total retail revenues, whereas wholesale growth was capped at 5% on the back the fading trends of international incoming calls. We note that ETEL has achieved a 7% q/q growth in revenues, due to strong contribution from Home & Consumer besides the International Customers & Networks segments. Furthermore, ETEL has managed to improve its EBITDA margin by as much as 420bps to 38.9%, due to a favorable shift in the company’s revenues mix.
We remind you that we have picked ETEL before in our newly-launched series TAKEStock dated 8 June 2021 after both ETEL and VODE have worked out new shareholder’s agreement, where we valued ETEL at EGP22.5/share (ETR +50%). Since then, ETEL soared by c.25%. We believe the new dividend policy, coupled by the strong earnings momentum for ETEL, should serve as a sufficient catalyst to help re-rate the stock from such ridiculous valuation levels. Despite the recent rally in the stock price, we note that ETEL is still trading at a TTM P/E of only 3.7x. We continue to see ETEL having sufficient growth locomotives in the foreseeable future despite its relatively large size and huge turnover capabilities, being the biggest infrastructure player in Egypt’s telecom sector, as well as potential engagement in fintech business down the road.
POSITIVE
ETEL: Another set of good results should help re-rate the stock further.