“Rostelecom” has published financial results and announces interim dividend
Q3 revenues were up 5% year-on-year to 79.4 billion rubles, in terms of its structure continue long-term trends: falling proportion of obsolete fixed telephony (now accounting for 21%), a growing proportion of broadband (25%), TV (11%) and various VAS (11%). Approximately 37% of revenue already accounts for the public sector and private business, but it is still the fastest growing segment (+9% year-on-year).
Operating profit increased by 19% to 10.9 billion rubles, OIBDA increased by 9% to RUB 27.3 billion (OIBDA margin was up 1.4 percentage points year-on-year to 34.4%). Net profit rose 46% to 5.7 billion RUB as a Key reason for the improved operating margin was the control of personnel costs. In turn, net income was also impacted by the reduction in debt service costs. The company’s debt (in relation to 12 months.
OIBDA is 2.0) is fully nominated in roubles and the cost of its maintenance cumulative falls as refinancing (following the decrease in the rate of the Central Bank of the Russian Federation). In addition, unlike last year, the company does have a formal loss from associated companies amid Tele2 on net profit.
Management has improved the forecast for 2018: revenue +3% (previously >2%), OIBDA margin >of 31.5% (unchanged), CAPEX of 60-65 bn (unchanged).
Simultaneously with the publication of the report was announced interim dividends for 9 months. 2018 in the amount of 2.5 rubles per share. Given the current quotes, the interim dividend yield for ordinary shares will amount to 3.6% per annum, and for preferred shares – 4.1% per annum. In the spring of Rostelecom’s updated dividend policy. Provided for dividend payments in the aggregate not less than RUB 5 per share and not less than 75% of free cash flow.
By the end of 2017 Rostelecom paid dividends in the amount of 5.05 RUB. per share (in the amount of RUB 13.3 billion.)
Source: “Opening Broker”
For comparison: the net profit for the year 2017 to $ 14.1 bn and free cash flow of RUB 20.4 billion, We believe that, despite the margin improvement, the company will not be able to radically change the amount of dividends paid in the foreseeable future because of future expenses for the “law of Spring” (including Tele2 estimated costs can be up to 8-10 billion rubles.).
Our projections and recommendations
The reporting looks quite positive relative to the current market capitalization. However, the observed improvement in margins and accelerating revenue growth will likely be more than offset by the subsequent cost of implementing the requirements of the “law of Spring”. Considering not outstanding by industry standards, the dividend yield and the dubious prospects of its improvement in the future, the main metric on which we rely in assessing the Russian state-owned companies, we believe the company’s shares an unattractive target for investment.