Morning Call about – Bottom line out of the red after 7 quarters – Arif Habib Limited
Karachi, March 04, 2013 (PPI-OT): LDI revenues jacking up the gross margins As earnings and top-line increase have been witnessed across the board in telecom companies on account of ICH-level rates being charged on int’l incoming calls, Telecard (with a market share of 3.3%) has been another beneficiary in this regard.
According to Arif Habib limited the company released its 1HFY13 accounts recently, where the company posted a PAT of PKR 155mn with an EPS of 0.52 in the 2QFY13, profitability in the bottom-line has been witnessed after seven financial quarters. Top-line witnessed a 55% QoQ jump to PKR 599mn in 2QFY13 from PKR 385mn in 1QFY13, whereas on 1HFY13 a PAT of PKR 9mn and EPS of 0.03 were posted. As mentioned before this is mainly attributed to their higher Long Distance Int’l (LDI) revenues segment that accounts now for 80% of their total revenue mix.
Gross margins showed astonishing improvement!
The company’s cost of sales registered a massive 51% QoQ decline from PKR 486mn to PKR 226mn as it managed to cut down cost of service, which in turn has massively improved gross profit margins to 62% in 2QFY13 compared to negative gross margins reported in 1QFY13.
Other income providing further support
Other operating income saw an increase from PKR 8mn to PKR 21mn as dividend income was realized from the company’s subsidiary ‘Supernet’. In addition to this, and a modest increase in TELE’s professional service segment further augmented the other income during the quarter under review.
|Financial Highlights (PKR mn)||1QFY13||2QFY13||QoQ||1HYFY12||1HYFY13|
|Profit/(Loss) after tax|
Source Company Financials & Arif Habib Research
What Arif Habib limited could expect going forward for LDI traffic and Telecard?
Arif Habib Limited preliminaries estimates are based upon average total monthly int’l minutes of 750mn since Jan’13. However, Arif Habib Limited industries channels suggest they could see a 5- 6% increase with grey traffic to be further curbed as various measures are being taking place by PTA to control this illegal flow of int’l traffic. This will prompt more foreign operators to opt legal channel, which will further boost the incoming traffic going forward.
Telecard’s earning could further be supported as the company’s management look to improve the cost efficiencies and profitability from their loss making non-LDI revenue segment. Although TELE is not in Arif Habib Limited officials coverage of companies, Arif Habib limited foresees the company to maintain stable earnings of 2QFY13 going forward. Arif Habib limited expects the company to earn an EPS of PKR ~1.00 (FY13) with a current PE 6.9x based on its forecasted FY13 EPS.