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The Uralsvyazinform phone company released positive financials for FY 2007, which, slighly missed our overly optimistic expectations. However, the company confirmed its stable position on the market and continues to grow profit margins. We believe that the company's shares, with an upside potential, represent a lucrative vehicle for investments.
On July 9 the Uralsvyazinform company disclosed its audited consolidated financials for FY 2007 under IFRS.
We are moderately upbeat on the financials released. The company posted revenue growth of 16% in ruble terms. The revenue figure outpaced our expectations by 1% (in comparison, CenterTelecom saw its revenue rise by a healthy 14% in 2007, even though the company lacks a profitable mobile business).
The OIBDA margin expanded by 5%, with growth attributed to the management's efficient performance. We, however, expected a steeper rise in OIBDA and the OIBDA margin. The gap between the actual results and expectations is linked with increased expenditures in two categories: ‘Depreciation and Amortization' (the faster-than-expected renovation of fixed assets during the year) and ‘Expenses on Telecoms Operators' Services (the higher-than-expected traffic from affiliated phone operators). However, we deem the 2% gap between the actual results and expectations as non-critical for the company, given that both spending items are to have a beneficial effect on the company's revenue over time.
Net profit nearly tripled, missing our expectations, which we also consider non-critical for the operator. Under IFRS, the trend is more important than the absolute net profit figure (dividends are calculated on the basis of net profit calculated to RAS).
URSI: Financial indicators for FY 2007 under IFRS, mn RUB
| | 2006 | 2007 | 2007/2006 | 2007/2007 (forecast) |
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| Revenue | 33,850 | 39,147 | 16% | 15% | | OIBDA | 9.167 | 12.538 | 37% | 13.341 | | OIBDA margin | 27% | 32% | 5% | 34% | | Net profit | 758.5 | 2.297 | 203% | 3.580 | | Net margin | 2% | 6% | 4% | 9% | | Depreciation and amortization | 5.582 | 6.514 | 17% | 4.917 | | Expenses on telecoms operators' services | 3.608 | 5.245 | 45% | 4.141 |
Source: company data, Finam estimates
We retain our fair prices for the company's shares at USD 0.064 per common share and USD 0.04 per preferred share and reiterate our BUY recommendation on both types of shares.
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Uralsvyazinform
Capitalization: $1 125 682 286,32
Common shares:
Price: $0,026
Target price: $0,064
Recommendation: Buy
Delta week: -20,6%
Delta month: -39,9%
Delta year: -54,9%
Preferred shares:
Price: $0,018
Target price: $0,036
Recommendation: Buy
Delta week: -19,2%
Delta month: -33,2%
Delta year: -49,2%
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1.169
115.98
