OREANDA-NEWS. North-West Telecom's (NW Telecom) revenue grew 23% y-o-y in 9M07 to $674mn, which is in line with Aton-Capital research forecast for company's revenue growth (IFRS) in 2007F. NW Telecom showed a 1% q-o-q decline in revenue in 3Q07. The company did not provide a revenue breakdown by service, but in the opinion of the analysts, the main reason behind the decline was seasonally weak revenue from the Internet segment (the number of Internet users traditionally decreases in July-August) and there is usually some local subscriber migration from unlimited to per minute tariff plans.

RAS-calculated EBITDA was up 33% y-o-y in 9M07 to $290mn and the EBITDA margin increased 3 pp y-o-y to 43%. 3Q07 EBITDA grew 1% q-o-q to $99mn with the EBITDA margin rising to 44%. Given that EBITDA under RAS can significantly differ from IFRS figures owing to different accounting principles, and that regional telecoms' EBITDA traditionally comes under pressure in 4Q07, the experts regard the reported EBITDA figure as neutral to their IFRS-based full year 2007F model.

Net income was up 48% y-o-y in 9M07 to $117mn. "We note that 9M07 RAS financials do not include proceeds from the sale of a 15% stake in Telecominvest. The deal was closed in mid-October, suggesting NW Telecom could reflect $325mn (R8.1bn) in additional net profit in its 4Q07 RAS financials. Hence, net profit under RAS could amount to $442mn for 2007F, which suggests a $0.176 annual dividend per a preferred share or a solid 15% dividend yield. However, we note that the company's 4Q07 organic net profit could see some pressure from annual non-monetary contributions to reserves and other issues. We reiterate our 'Buy' recommendation on NW Telecom's common and preferred shares and 12-month target prices of $2.06 and $1.86 respectively," the experts sum up.