Morning Call about – PTC to post EPS of PKR 1.30, interim dividend a possibility – Arif Habib Limited
Karachi, July 15, 2013 (PPI-OT): PTC in 1HCY13 to post EPS of PKR 1.30 The BoD of Pakistan Telecommunication Company Ltd (PTC) is to announce the 1HCY12 financial results on 16 th of Jul’13.
According to Arif Habib Limited expects PTC, on a consolidated basis, to post an EPS of PKR 1.30 (0.65 in 2QCY13). to Arif Habib Limited foresees a slight 3% YoY decline in earnings despite significant drop in LDI minutes (down 64% YoY) but at a significantly higher ICH driven rates (USc 8.8/min since Oct’12).
Arif Habib Limited expects PTC’s 2QCY13 earnings to remain at the level of 1QCY13 despite QoQ decline in LDI minutes that is expected to have been compensated by increase in revenues of Ufone (1.9% increase in subscribers during Apr-Jun’13 period) post a ban on SIM sales imposed by the gov’t on retail outlets.
On the other hand, broadband revenues (14% growth in total EvDO users during Apr-Jun’13 period) are expected to have further supported the topline in the 2QCY13.
Financial Highlights (PKR mn) 1QCY13A 2QCY13E QoQ 1HCY13E 1HCY12A YoY CY13E Net Sales 32,181 30,648 -5% 62,829 55,834 13% 127,408 Gross Profit 11,435 10,793 -6% 22,228 19,513 14% 44,963 GP Margin 36% 35% 35% 35% 35% Other Income 1,233 1,269 3% 2,502 3,490 -28% 5,039 Finance Cost 1,070 982 -8% 2,052 1,885 9% 4,092 Profit after tax 3,331 3,303 -1% 6,634 6,815 -3% 13,715 EPS (PKR) 0.65 0.65 -1% 1.30 1.34 -3% 2.69 Source Company Financial and AHL Research
Potential Warid deal and ICH hearing in SHC on 13th Aug’13
Warid Telecom continues to be on sale in the market with Zong recently backing out of the deal to focus more on LDI and 3G license instead.
With only interest being expressed at the moment by Etisalat, an influx though of Warid to Ufone’s network will bring PTC closer to the market leader Mobilink. The addition of Warid users and with 3G spectrum would also substantially help increase Ufone’s ARPUs.
CCP’s imposed penalty and action to declare the ICH arrangement null and void is pending in Sindh High Court(SHC) with next hearing scheduled for 13 th August, Arif Habib Limited believes the case will further linger on with no outcome imminent.
PKR 0.5-0.75 dividend expected with 2QCY13 results
The stock has rallied 11% since the start of Jul’13 partially due to cash dividend expectations as well. An interim DPS in 1HCY12 of PKR 0.50-75.0 cannot be ruled out due to PTC’s strong operating cash flows (PKR 13bn in 1QCY13) and no payout in CY12 due to hefty VSS payment (PKR 9.5bn, PKR 1.86/share) in 2HCY12.
However, some hurdles that may come in the way of expected interim payout would be the consideration of 3G spectrum auction and its related infrastructure funding.
Arif Habib Limited recommends a ‘Buy’ stance on PTC with Arif Habib Limited Dec-end price target of 29/share (17% upside potential).