PANTELAKIS SECURITIES S.A.- report: Τιμή στόχου 11,50 ευρώ για την μετοχή του ΟΤΕ


Overweight Target price (EUR) 11.50

Share price (EUR) 8.70

Forecast dividend yield (%)

Potential return (%) 32

Strong Greek fixed and rebounding mobile ops

 Fixed in Greece shines again, yet Romania remains an drag

 Mobile rebounds strongly in 2Q, with domestic ops weathering well Greece’s fiscal drag

 N/D drops further in 2Q as FCF generation accelerates q-o-q

2Q16 was on the whole in-line with expectations, however excluding Romania’s weak fixed line, results were in fact stronger, we believe. In sum, group turnover at EUR955m was flat y-o-y (+2.8% q-o-q), while adjusted EBITDA of EUR311m dropped 2.2% (+0.5% q-o-q), a sharp deceleration in the rate of decline compared to the previous four quarters. Greek fixed line remained strong, despite the country’s adverse macro backdrop, which did weigh though on mobile. And while Balkan mobile ops fared relatively well, fixed line in Romania remains under heavy pressure.

At the same time, FCF in 2Q amounted to EUR125m from EUR24m in the previous quarter, as the impact of capital controls is gradually phased out, thus driving net debt to EUR736m, compared to EUR853m at end-1Q and EUR864m at end-2015.

Management continues to flag Greece’s macro woes and the resulting fiscal drag on consumers’ disposable income, yet it also reiterated its FY16 FCF guidance of cEUR0.5bn. In addition, it has stepped up cost containment efforts, with the recently launched voluntary exit scheme expected to yield EUR13m of savings pa. Remains a key Overweight.


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