Dalsvyaz Reports Good 3Q07 RAS Results
OREANDA-NEWS. Dalsvyaz' non-consolidated RAS revenue grew 16% y-o-y to $318mn in 9M07 (10% y-o-y in rubles) and 1% q-o-q in 3Q07, the Aton Capital research department reports with reference to Dalsvyaz. The reported figures largely support analysts' current model projection of 13% organic top-line growth (IFRS) in 2007. Local revenue grew 8% q-o-q to $45mn, as the company raised unlimited tariffs by 25% on average from July 1. Local ARPL increased 17% y-o-y to $11/month.
Dalsvyaz reported 133,000 broadband subscribers as of end-September, which suggests a 5,000 subscriber outflow from end-2Q07 due to the traditionally weak summer season. The number of IPTV subscribers was 10,300 as of end-September - a 60% rise q-o-q. IPTV ARPL was $37 in 3Q07. Dalsvayz remains the leading regional telecom in terms of VAS development. Data transmission and VAS rose 58% y-o-y in 9M07 to $52mn and accounted for 16% of the company's top line. Dalsvyaz (including subsidiaries AKOS and BIT) had 326,000 mobile subscribers as of end-September - a 2% increase q-o-q.
RAS EBITDA was up a healthy 7% q-o-q to $43mn in 3Q07 (EBITDA was up 21% y-o-y in 9M07 to $127mn), and the EBITDA margin expanded to 40% for 9M07. Staff costs decreased 5% q-o-q, as Dalsvyaz continued to optimize its business process and reduce its staff.
According to the analysts, the board of directors is to consider the sale of mobile assets (AKOS and BIT) at its November meeting; management expects the deal would close in early 2008. This suggests proceeds from the sale would likely be reflected in the company's 2008 financial results under both RAS and IFRS, and 2007 dividends would not see a boost from the sale; Management is guardedly optimistic about the possible outcome of the current negotiations over local tariff indexing with FTS, saying that rises in unlimited tariff are justified by the sustainable growth in minutes of use; management is also concerned about the low liquidity of the company's shares, but sees no opportunity to substantially improve the situation in the near future.
"We see a risk that regional telecoms could raise their capex requirements for the next two years to ensure 100% digitalization of local fixed networks by end-2009, as called for by the government. The 3Q07 RAS results are neutral to our current model estimates; however, we again came away from the meeting with a positive impression. We remain bullish on Dalsvyaz, keeping our Buy rating of the company's stock. Our 12-month target price is $7.03 per common share," the experts conclude.
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