Analysts cut Kazakhtelecom target price, keep neutral stance amid weak earnings
What can we expect from Kazakhtelecom’s shares? / Photo: Kursiv.media, photo editor: Arthur Aleskerov
According to a survey of analysts by Freedom Broker, the consensus target price for Kazakhtelecom shares has been revised lower 8.2%, from $95.70 per share to $87.85 per share. This is driven by the operator’s latest quarterly report, which analysts interpreted as moderately downbeat. Even so, they rate the stock a "hold."
Freedom Broker notes that though revenue increased 5.8% year over year, the company’s profitability declined due to rising costs. Higher capital expenditures have also resulted in negative cash flow.
This is generally unsurprising, analysts wrote, as Kazakhtelecom typically reports its strongest results in the fourth quarter. The operator posted a 13% year-over-year decline in net profit attributable to majority shareholders, though this figure doubled quarter over quarter due to elevated staff expenses in late December last year, resulting in a net profit of $55.3 million.
Freedom Broker added that the company’s financial performance came in worse than expected. They anticipate this negative trend to continue in the upcoming quarters, potentially causing further downgrades to the target price.
"In our valuation model, we have increased the net debt ratio and the market value of the uncontrolled stake due to the rising Kcell share price. We have also forecast a greater increase in capital costs and in the weighted average cost of capital against the backdrop of soaring government bond yields," Freedom Broker stated.
Freedom Broker believes that once the sale of Mobile Telecom Service, which operates under the Tele2 and Altel brands, to Power International Holding from Qatar is completed, Kazakhtelecom shareholders may receive a special dividend payment. However, the deal, which has been approved both by shareholders and by the board of directors, could result in lower revenue and a decline in the company’s share price.
