Egypt Telecom shares are expected to receive a boost in the few coming month as the country’s fixed-line monopoly is transforming its business model into a full-fledged telecom operator, a recent report by Markets Chimp.
Markets Chimp, which covers major stock markets in the US, Canada, UK, France, Germany, Turkey, Egypt, GCC, and Japan, believes also that this begs a different valuation approach that considers each business separately … 10 years down the line.
“Back in April 2017, we looked at Telecom Egypt (EGX: ETEL), the country’s fixed-line monopoly that was undergoing a transformation to become a full-fledged telecom operator. The stock was trading back then at EGP 11.60 a share, including a cash dividend of EGP 1 per share (a 9% yield) which paid out on 27 April. On Monday, the stock traded last at EGP 12.52, valuing the company at EGP 21.4 billion. In other words, the stock has returned 17% in just five months,” the report said.
According to the report, the stock has probably rallied recently on the news that Telecom Egypt is about to launch its mobile operations soon.
“However, we think investors should take a different approach in valuing Telecom Egypt as a fixed-line operator with just another mobile license. We think the company should be looked at with a 10-year view. As it stands today, Telecom Egypt includes the following business lines: (Fixed line- Data- Contact centre- Mobile-Cables),” the report added.
“This is the whole spectrum of all possible telecom services that can be offered in Egypt … today. However, we think with the convergence between telecom and media, Telecom Egypt will be better positioned to lead this evolution,” it added.
Market Chimps thinks Telecom Egypt has all it takes to become Egypt’s home-grown Netflix, offering its data subscribers (the largest in the country) streaming media and video-on-demand.
“To reach a fair value for Telecom Egypt, there are different approaches. One is using consolidated cash flows then adding any non-operating investments and assets. Another is using comparable valuation multiples of similar operators. However, given the diversity of Telecom Egypt’s business lines, we prefer to use a sum-of-the-parts (SOTP) approach.”
According to a report, Telecom Egypt’s Enterprise Value would be valued at EGP 36.2 billion.
Net Debt & Other Liabilities: With a net debt of EGP 4.75 billion and other liabilities due worth EGP 6.1 billion, total deductions would be EGP 10.9 billion.
The report reached a fair value for Telecom Egypt at EGP 25.3 billion or EGP 14.84 per share, which is almost the same IPO price stock sold for around 12 years ago.
Telecom Egypt (TE) on Wednesday announced launching the fourth mobile network “WE” in Egypt to be the first integrated telecommunication operator in Egypt.
The firm inaugurated its first and latest customer service centre, as well as sales points to provide telecom services, the telecom firm said, noting that it aims to increase the number of main branches over the next period, according to a bourse filing.
TE is currently reviewing the establishment of cell towers operated by the green field system in the agricultural areas as part of the company’s plan to cover mobile network in Delta, according to official sources.
