Saturday, 16. December 2017  
21.09.2017 01:46
Author: Nic

STOCK SCREEN: European Telecom Stocks With Low Price/Book Value And High Dividend Yield

 

The Telecom sector performed poorly over the last ten years as the impact of regulation and harmonization among European countries began to hit evenues and margins. A continuously increasing optical network footprint and LTE network coverage, and introducing the latest technology such as LTE Advanced Pro raise the average speeds but the cost of fiber is a problem, as investments are very high and very difficult to justify.

Carriers can’t avoid the investment, with the need for fixed and wireless networks to be more integrated in the future. Data use is rising at home and on mobile devices and fiber will be required to carry a boost in traffic expected to hit towers in Europe with the start of fifth-generation wireless services around 2020.

Preliminary talks between Vodafone and BT Group Plc in the U.K., where full-fiber coverage sits at 2 percent, may widen a trend that’s also taken hold in Spain and Portugal, where fiber is directly available to more than 70 percent of buildings. Carriers like Orange SA and Vodafone Group Plc have long partnered on mobile-phone masts and equipment to save money. They’re starting to take a similar approach with fiber as they prepare for the data demands of next-generation applications like virtual reality and self driving cars.

Regulators are encouraging the cooperation. The European Commission, seeking to spur competition and bring faster speeds to consumers at lower costs, is proposing to ease the regulatory burden on co-investment projects. Partnering on fiber can also drive higher profits than renting capacity from incumbents like Spain’s Telefonica SA and Orange SA in France. New projects generate earnings before interest, taxes, depreciation and amortization margins of about 50 percent, versus 20 percent for wholesale agreements, Bloomberg Intelligence analysts say.

 

In looking for strong ideas this week, we screen the European telecom sector for companies with high Dividend Yield and low Price/Book-Multiple.

 

Here are the filter criteria:

1. Market capitalization above 1bn.

2. Price/Book-Multiple below Market Median

3. Dividend Yield above 4 %

3. Upside to Intrinsic Value according to our Graham and Greenblatt AVM estimate.

 

Here is our list of stocks in alphabetical order. Intrinsic Value Model assumptions can be adapted to analyze different growth scenarios with our MODELER forecasting tool:

CLICK COMPANY NAME FOR DETAILED STOCK VALUE ANALYSIS

COUNTRY

LAST PRICE

MARKET CAP.

MEAN MULTIPLE UPSIDE [%]

PRICE / BOOK

DIVIDEND YIELD [%]

NETDEBT / EBITDA

 VODAFONE GROUP PLC

 United Kingdom

208.40

56760

13.9

0.9

6.2

1.5

 TELIA CO AB

 Sweden

38.74

167747

2.2

1.8

5.4

2.0

 TELEFONICA DEUTSCHLAND HOLDI

 Germany

4.61

13707

-10.5

1.6

5.6

0.6

 SES

 Luxembourg

18.14

8347

34.4

1.3

7.6

2.6

 ORANGE

 France

13.73

36523

7.4

1.2

4.8

1.9

 NETGEM SA

 France

2.46

102

-50.7

1.9

6.1

-3.0