Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Communications (TCOM)
Telecom
4QFY11 – revenues disappoint; one-offs aid margins and PAT. TCOM reported
another subdued quarter with a revenue growth of 2% qoq and cost-reversal-led 130
bps qoq expansion in OPM at the consolidated level. In any case, core business
fundamentals have little relevance for the stock – it forms just about 25% of our SOTP
valuation with surplus land and TTSL stake contributing the rest. We lower our TTSL
valuation estimate and cut TP on TCOM to Rs205 from Rs225. Reiterate REDUCE.
4QFY11 consolidated results – weak, on balance
TCOM reported a 1.9% sequential growth in consolidated revenues to Rs30.7 bn (+9% yoy).
Revenue growth in rupee terms was aided by a depreciation in the currency; US$ revenues grew a
modest 1% sequentially. Standalone revenues declined 1.6% qoq; yoy revenue growth at the
standalone level was just 2%. Margin expansion at the consolidated level (+130 bps qoq to 11.6%)
was aided by reversal (US$5-6 mn as per the management) in network opex; adjusted margin
expansion would have been in the 50 bps range. Lower interest expense (down to Rs953 mn in
4QFY11 versus Rs1.5 bn in 3QFY11) was a positive surprise – the company indicated that they
have been able to refinance US$525 mn of debt at a lower rate. This, lower tax provisions, and
decline in share of loss of associates (Neotel, South Africa) led to a decline in net loss qoq (Rs1.62
bn versus Rs1.97 bn in 3QFY11).
Business fundamentals – same old story – good volume growth, pressure on pricing
TCOM ended FY2011 with a yoy revenue growth of 8.2% over FY2010. The global voice business
(55% of gross revenues) grew 6%, while global data services revenues were up around 10% yoy.
On the voice side, the company indicated a 25% growth in international wholesale voice minutes
with a 23% decline in net retention per minute yoy. The story on the data side was similar –
strong volume growth coupled with consistent pressure on pricing. Aggressive cost control (as
reflected in a yoy decline in absolute admin costs) drove a 110 bps improvement in margins yoy,
driving a strong 21% growth in EBITDA. However, increase in losses in Neotel and non-recurrence
of exceptional gains (the company gained from stake sale in TTSL in FY2010) drove an increase in
losses in FY2011 (Rs8.5 bn in FY2011 versus Rs6 bn in FY2010).
Recovery in core business some time away; no clarity on land sale; reiterate REDUCE rating
We reiterate our REDUCE rating on the stock with a reduced target price of Rs205/share (Rs225
earlier). Our fair value estimate is SOTP-based (see Exhibit 1 for details) and comprises
Core business valued at Rs51/share – based on 6X FY2013E estimated consolidated EBITDA of
Rs15.8 bn less net debt of Rs80 bn.
9% stake in TTSL (post the recent rights issue) valued at Rs47/share.
Surplus land assets valued at Rs107/share – at 50% discount to the fair value
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Communications (TCOM)
Telecom
4QFY11 – revenues disappoint; one-offs aid margins and PAT. TCOM reported
another subdued quarter with a revenue growth of 2% qoq and cost-reversal-led 130
bps qoq expansion in OPM at the consolidated level. In any case, core business
fundamentals have little relevance for the stock – it forms just about 25% of our SOTP
valuation with surplus land and TTSL stake contributing the rest. We lower our TTSL
valuation estimate and cut TP on TCOM to Rs205 from Rs225. Reiterate REDUCE.
4QFY11 consolidated results – weak, on balance
TCOM reported a 1.9% sequential growth in consolidated revenues to Rs30.7 bn (+9% yoy).
Revenue growth in rupee terms was aided by a depreciation in the currency; US$ revenues grew a
modest 1% sequentially. Standalone revenues declined 1.6% qoq; yoy revenue growth at the
standalone level was just 2%. Margin expansion at the consolidated level (+130 bps qoq to 11.6%)
was aided by reversal (US$5-6 mn as per the management) in network opex; adjusted margin
expansion would have been in the 50 bps range. Lower interest expense (down to Rs953 mn in
4QFY11 versus Rs1.5 bn in 3QFY11) was a positive surprise – the company indicated that they
have been able to refinance US$525 mn of debt at a lower rate. This, lower tax provisions, and
decline in share of loss of associates (Neotel, South Africa) led to a decline in net loss qoq (Rs1.62
bn versus Rs1.97 bn in 3QFY11).
Business fundamentals – same old story – good volume growth, pressure on pricing
TCOM ended FY2011 with a yoy revenue growth of 8.2% over FY2010. The global voice business
(55% of gross revenues) grew 6%, while global data services revenues were up around 10% yoy.
On the voice side, the company indicated a 25% growth in international wholesale voice minutes
with a 23% decline in net retention per minute yoy. The story on the data side was similar –
strong volume growth coupled with consistent pressure on pricing. Aggressive cost control (as
reflected in a yoy decline in absolute admin costs) drove a 110 bps improvement in margins yoy,
driving a strong 21% growth in EBITDA. However, increase in losses in Neotel and non-recurrence
of exceptional gains (the company gained from stake sale in TTSL in FY2010) drove an increase in
losses in FY2011 (Rs8.5 bn in FY2011 versus Rs6 bn in FY2010).
Recovery in core business some time away; no clarity on land sale; reiterate REDUCE rating
We reiterate our REDUCE rating on the stock with a reduced target price of Rs205/share (Rs225
earlier). Our fair value estimate is SOTP-based (see Exhibit 1 for details) and comprises
Core business valued at Rs51/share – based on 6X FY2013E estimated consolidated EBITDA of
Rs15.8 bn less net debt of Rs80 bn.
9% stake in TTSL (post the recent rights issue) valued at Rs47/share.
Surplus land assets valued at Rs107/share – at 50% discount to the fair value
No comments:
Post a Comment