Business / Companies
Econet reports a robust set of interim results
04 Oct 2011 at 01:29hrs | Views
Econet reported a robust set of financials showing attributable earnings of $74.3 million, up 15% year on year. The solid performance was driven by a 25% year on year subscriber growth, improved net work efficiency, increased Memorandum of Understanding and the launch of new products.
Subscribers closed the period at 5.6 million although the company initially lost 1.4 million subscribers due to the compulsory disconnection of unregistered subscribers around February 2011. Econet remained dominant commanding a market share of 70%. ARPUs increased 10% to $10.70 supported by data, broadband and VAS e.g. Ecolife and eTXT. Voice contributed 75.9% to total revenue, up from 62.9% the prior period (on improved network optimisation) while data & SMS contributed 13%, down from 15%.
Management attributed the decline in data contribution to the introduction of per second billing which resulted in subscribers migrating from txt to voice. A total of 1.5 million subscribers were connected to broadband and 590,000 were on eTXT. EBITDA margins eased 370bps to 45% negatively impacted fuel costs to power base stations and the increased cost of the network.
An interim dividend of 11.8 US cents per share was declared implying an annualised dividend yield of 6.0% and 4.0x cover. The dividend shall be paid monthly at 2.95 US cents per share a month from November 2011 to February 2012.
Cash generation was solid with EBITDA/OCF of 97%. Capex was $38.7 million and net gearing improved to 68% from 86% at year end. EBITDA interest coverage was high at 11.3x, although finance charges increased 406% as the company reached peak funding.
Management state that future expansion shall be funded from internally generated cashflows.
Fixed assets decreased 10% to $451.2 million as Ecoweb was treated as an associate since Econet does not have management control although Ecoweb is 51% owned by Econet. A significant amount of current assets relates to the deposits for equipment.
The demand for group products remains strong given the weak competition. Econet enjoys higher ARPUs than local peers due to the high value subscriber base, mainly corporates who are on post paid. The high value subscribers reduce the incremental cost of adding low value subscribers.
The focus for Econet will be on innovation, improving the quality of service and cost containment. We anticipate increased dividend payouts once the company is post its peak funding.
Management state that ARPUs and margins will be defended at $10 and 49%, respectively.
Imara Stockbrokers says "Econet remains a great company, however, our main concerns relate to the likely squeeze on margins and ARPUs exacerbated by the high base the Company is coming from. In our view the move to retail (of accessories) will impact margins. That said, ratings are undemanding at EV/Subscriber of $149 against regional peer average of approximately $214 (a discount of 30%) and PER+1 of 4.0x versus a regional average of 10.7x. BUY."
Subscribers closed the period at 5.6 million although the company initially lost 1.4 million subscribers due to the compulsory disconnection of unregistered subscribers around February 2011. Econet remained dominant commanding a market share of 70%. ARPUs increased 10% to $10.70 supported by data, broadband and VAS e.g. Ecolife and eTXT. Voice contributed 75.9% to total revenue, up from 62.9% the prior period (on improved network optimisation) while data & SMS contributed 13%, down from 15%.
Management attributed the decline in data contribution to the introduction of per second billing which resulted in subscribers migrating from txt to voice. A total of 1.5 million subscribers were connected to broadband and 590,000 were on eTXT. EBITDA margins eased 370bps to 45% negatively impacted fuel costs to power base stations and the increased cost of the network.
An interim dividend of 11.8 US cents per share was declared implying an annualised dividend yield of 6.0% and 4.0x cover. The dividend shall be paid monthly at 2.95 US cents per share a month from November 2011 to February 2012.
Cash generation was solid with EBITDA/OCF of 97%. Capex was $38.7 million and net gearing improved to 68% from 86% at year end. EBITDA interest coverage was high at 11.3x, although finance charges increased 406% as the company reached peak funding.
Management state that future expansion shall be funded from internally generated cashflows.
Fixed assets decreased 10% to $451.2 million as Ecoweb was treated as an associate since Econet does not have management control although Ecoweb is 51% owned by Econet. A significant amount of current assets relates to the deposits for equipment.
The demand for group products remains strong given the weak competition. Econet enjoys higher ARPUs than local peers due to the high value subscriber base, mainly corporates who are on post paid. The high value subscribers reduce the incremental cost of adding low value subscribers.
The focus for Econet will be on innovation, improving the quality of service and cost containment. We anticipate increased dividend payouts once the company is post its peak funding.
Management state that ARPUs and margins will be defended at $10 and 49%, respectively.
Imara Stockbrokers says "Econet remains a great company, however, our main concerns relate to the likely squeeze on margins and ARPUs exacerbated by the high base the Company is coming from. In our view the move to retail (of accessories) will impact margins. That said, ratings are undemanding at EV/Subscriber of $149 against regional peer average of approximately $214 (a discount of 30%) and PER+1 of 4.0x versus a regional average of 10.7x. BUY."
Source - Imara Stockbrokers
