On August 12 MTS reported its 1H 2008 financials to US GAAP.
The robust financials posted were anticipated on market. Phone operators tend to improve their financial performance in 2Q as compared with 1Q. We should also note that the posted financial results fully met investor expectations. The statement says that revenue increased by 35% y-o-y, after surging by 37% y-o-y in 1Q 2008. We expect the full-year revenue growth of 25%, meaning that the growth already achieved markedly surpasses the full-year target.
The 2Q OIBDA margin edged up 2% quarter-on-quarter, while the same margin for 6M was still lower than a year ago. We expect a full-year OIBDA margin of 48%, a cautious prediction in the current circumstances.
MTS: 1H 2008 financial results under US GAAP
| | 1H2007 | 1H2008 | 1H2008/1H2007 |
|---|
| Revenue | 3,710,001 | 5,014,666 | 35% |
| OIBDA | 1,921,822 | 2,524,956 | 31% |
| OIBDA margin | 52% | 50% | -2% |
| Net profit | 956,457 | 1,269,357 | 33% |
| Net margin | 26% | 25% | -1% |
Source: company data, Finam estimates
The 1H net margin slightly declined, which, however, exerts practically no influence on the company's attractiveness, as only a full-year net margin is of paramount importance.
On the downside, we should note that the company continues to grow primarily within Russia rather than expanding abroad. In 2Q, the company saw a marginal revenue growth only in Uzbekistan, but instead of expanding into neighboring regions, the company is rapidly losing its market share in Ukraine and has not yet broken into the Kazakh market (see our report of November 14, 2007). For all that, the operator as a whole continues to grow dynamically and it is still too early to make definite conclusions about its expansion plans.
Our recommendation on MTS shares is now under revision and we are sure to heed the latest tendencies while updating our target price for the company.
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