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The FY 2007 IFRS financials disclosed by Rostelecom slightly missed expectations. However, they are unlikely to have a tangible impact on the company's stock valuations. The financial results reported have nothing in common with the opeartor's fundamental value. We are generally downbeat on the company's prospects. The company will likely see its market share shrink, while stiff competition on the market could lead to a decrease in the price of its services and, therefore, to declining revenue.
On July 1, long-distance phone operator Rostelecom disclosed its FY 2007 financials calculated to IFRS.
The weak financial results were anticipated. Revenue rose by only 5%, in line with our expectations, while OIBDA grew at a slightly higher pace than revenue. The OIBDA margin remained unchanged at a rather low level by the industry's standards, against the 2% rise expected. The net margin reached 4%, falling markedly short of expectations.
Rostelecom: FY 2007 financials results under IFRS
| | 2006 | 2007 | 2007/2006 | 2007/2007 (forecast) |
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| Revenue | 61559 | 64602 | 5% | 5% | | OIBDA | 10324 | 11110 | 8% | 12 061 | | OIBDA margin | 17% | 17% | 0%. | 19% | | Net profit | 1 456 | 2 806 | 93% | 4 648 | | Net margin | 2% | 4% | 2% | 7% | | Intercity traffic, mn. minutes | 9 722 | 10 175 | 5% | 10 346 |
Source: company data, Finam estimates
The posted financial results, even though negative, are unlikely to have a tangible impact on the company's stock valuations. We reaffirm that the company's current stock valuations have nothing in common with its fundamental value, and may have resulted from activities by some shareholders. We reiterate our SELL recommendation on both types of the company's shares and set the target price at USD 2.47 per common share and USD2.02 per preferred share.
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Rostelecom
Capitalization: $5 569 631 855,15
Common shares:
Price: $7,46
Delta week: 8,5%
Delta month: -8,2%
Delta year: -31,0%
Preferred shares:
Price: $0,55
Delta week: -3,2%
Delta month: -12,8%
Delta year: -79,6%
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0.569
0.073
