Kcell JSC EBITDA dropped on 25.8% in 2015 and Revenue dropped on 10.2%

29 Jan 2016 • About Kcell JSC ($KCEL) • By InTwits

Kcell JSC reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Kcell JSC has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.0%. At the same time it's in pair with industry average of 14.5%.
CAPEX is quite volatile: 42,550 in 2015, 20,549 in 2014, 17,795 in 2013, 13,370 in 2012, 12,905 in 2011
The company has highly profitable business model: ROIC is at 40.2%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Kcell JSC ($KCEL) key annual financial indicators

mln. KZT	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	178,786	182,004	187,599	187,581	168,424	-10.2%
Gross Profit	108,831	105,712	108,130	103,360	78,492	-24.1%
SG&A			26,631	22,215	21,602	-2.8%
EBITDA	105,794	100,683	104,727	104,079	77,179	-25.8%
Net Income	66,858	61,828	63,392	58,271	46,632	-20.0%
Balance Sheet
Cash	1,353	3,075	18,916	19,520	31,589	61.8%
Short Term Debt	0	48,991	24,721	25,020	50,201	100.6%
Long Term Debt	0	0	0	0	0
Cash flow
Capex	24,544	23,263	17,313	17,983	15,985	-11.1%
Ratios
Revenue growth	17.2%	1.8%	3.1%	-0.0%	-10.2%
EBITDA growth	20.3%	-4.8%	4.0%	-0.6%	-25.8%
Gross Margin	60.9%	58.1%	57.6%	55.1%	46.6%	-8.5%
EBITDA Margin	59.2%	55.3%	55.8%	55.5%	45.8%	-9.7%
Net Income Margin	37.4%	34.0%	33.8%	31.1%	27.7%	-3.4%
SG&A, % of revenue			14.2%	11.8%	12.8%	1.0%
CAPEX, % of revenue	13.7%	12.8%	9.2%	9.6%	9.5%	-0.1%
ROIC	69.2%	63.7%	66.0%	62.9%	40.2%	-22.7%
ROE	57.7%	66.3%	77.6%	61.6%	54.1%	-7.5%
Net Debt/EBITDA	-0.0x	0.5x	0.1x	0.1x	0.2x	0.2x

Revenue and profitability

Kcell JSC's Revenue dropped on 10.2% in 2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 9.7 pp from 55.5% to 45.8% in 2015.

Gross Margin decreased on 8.5 pp from 55.1% to 46.6% in 2015. SG&A as a % of Revenue increased slightly on 0.98 pp from 11.8% to 12.8% in 2015.

Net Income marign decreased on 3.4 pp from 31.1% to 27.7% in 2015.

Capital expenditures (CAPEX) and working capital investments

In 2015 the company had CAPEX/Revenue of 9.5%. The company showed decline in CAPEX/Revenue of 3.3 pp from 12.8% in 2012 to 9.5% in 2015. It's average CAPEX/Revenue for the last three years was 9.4%.

Return on investment

The company operates at high and attractive ROIC (40.20%) and ROE (54.06%). ROIC dropped on 22.7 pp from 62.9% to 40.2% in 2015. ROE decreased on 7.5 pp from 61.6% to 54.1% in 2015.

Leverage (Debt)

Debt level is 0.2x Net Debt / EBITDA and 0.7x Debt / EBITDA. Net Debt / EBITDA jumped on 0.2x from 0.1x to 0.2x in 2015. Debt surged on 101% in 2015 while cash surged on 61.8% in 2015.

Appendix 1: Peers in Mobile Telecommunications

Below we provide Kcell JSC benchmarking against other companies in Mobile Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Monitise ($MONI)		136.2%	101.7%	30.6%	-5.7%
Zamano ($ZMNO)	-5.0%	28.0%	-16.5%	23.9%
Sistema Jsfc ($SSAA)	19.1%	9.7%	-44.6%	8.7%
Megafon OJSC ($MFON)	12.6%	12.3%	9.1%	5.9%
Sk Telecom ($SKMD)	2.7%	1.3%	2.9%	3.4%
Median (6 companies)	2.7%	11.0%	-0.9%	7.3%	-5.7%
Kcell JSC ($KCEL)		1.8%	3.1%	-0.0%	-10.2%

Top companies by Gross margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Sk Telecom ($SKMD)	94.0%	92.0%	92.2%	90.2%
Global Telecom Hldg Sae ($GLTD)	55.9%	57.6%	82.1%	83.4%
Megafon OJSC ($MFON)	75.7%	75.4%	74.6%	73.1%
Monitise ($MONI)	61.5%	66.4%	75.8%	64.9%	51.8%
Sistema Jsfc ($SSAA)	59.6%	59.5%	54.4%	50.4%
Median (6 companies)	60.6%	62.9%	75.2%	69.0%	51.8%
Kcell JSC ($KCEL)	60.9%	58.1%	57.6%	55.1%	46.6%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Megafon OJSC ($MFON)	41.6%	42.4%	44.2%	43.5%
Global Telecom Hldg Sae ($GLTD)	49.2%	50.8%	12.1%	42.8%
Sk Telecom ($SKMD)	29.7%	26.9%	29.2%	27.5%
Sistema Jsfc ($SSAA)	21.5%	20.1%	33.3%	23.9%
Zamano ($ZMNO)	2.4%	13.1%	15.9%	13.4%
Median (6 companies)	25.6%	23.5%	22.5%	25.7%	40.0%
Kcell JSC ($KCEL)	59.2%	55.3%	55.8%	55.5%	45.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Global Telecom Hldg Sae ($GLTD)	12.4%	8.6%	15.7%	36.5%
Megafon OJSC ($MFON)	30.2%	17.1%	14.5%	18.5%
Sk Telecom ($SKMD)	18.6%	21.0%	17.3%	17.5%
Sistema Jsfc ($SSAA)	11.2%	11.3%	13.3%	14.2%
Monitise ($MONI)	15.0%	8.7%	7.0%	5.1%	4.6%
Median (6 companies)	13.7%	10.0%	13.9%	15.9%	4.6%
Kcell JSC ($KCEL)	13.7%	12.8%	9.2%	9.6%	9.5%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Zamano ($ZMNO)	-4.4%	31.4%	30.9%	25.5%
Megafon OJSC ($MFON)	17.4%	21.0%	27.7%	23.7%
Global Telecom Hldg Sae ($GLTD)	15.4%	17.8%	-6.9%	17.4%
Sk Telecom ($SKMD)	11.9%	8.9%	9.8%	8.3%
Sistema Jsfc ($SSAA)	12.1%	11.7%	12.1%	8.3%
Median (6 companies)	12.0%	14.8%	11.0%	12.9%	-24.3%
Kcell JSC ($KCEL)	69.2%	63.7%	66.0%	62.9%	40.2%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Sistema Jsfc ($SSAA)	2.1x	2.0x	1.5x	2.7x
Global Telecom Hldg Sae ($GLTD)	1.7x	1.5x	5.6x	2.0x
Megafon OJSC ($MFON)	0.4x	1.2x	1.1x	1.4x
Sk Telecom ($SKMD)	0.9x	1.4x	1.1x	1.3x
Zamano ($ZMNO)	12.4x	-0.1x	-0.8x	-1.7x
Median (5 companies)	1.7x	1.4x	1.1x	1.4x	-2.2x
Kcell JSC ($KCEL)	-0.0x	0.5x	0.1x	0.1x	0.2x

Kcell JSC stock price chart

Kcell JSC financials

mln.	FY2010	FY2011	FY2012

Revenue	152,488	178,786	182,004
EBITDA	87,933	105,794	100,683
Net income	54,768	66,858	61,828
CAPEX	21,039	24,544	23,263
Debt	0.000	0.000	48,991
Cash	5,245	1,353	3,075

About Kcell JSC

Kcell Joint Stock Company provides mobile communication services to prepaid, postpaid, and paid-in-advance subscribers in Kazakhstan. The company provides primary call services to subscribers; and voice mail, call waiting, call forwarding, caller identification, and conference call services. It also offers data transmission services, including Internet access services for approximately 50,00,000 data users. The company operates an intra-city fibre optic cable of length 1,366 kilo meters in Kazakhstan. In addition, it provides a range of additional services, including short message services and multimedia messages services, as well as information and entertainment services, such as ring back tones, financial services, weather forecasts, exchange rates, news, and other information. The company offers its products under the Kcell brand to postpaid and paid-in-advance subscribers; and Activ brand to prepaid subscribers. Further, it sells handsets to distributors and subscribers; and rents transmission lines to other operators. The company was formerly known as GSM Kazakhstan OAO Kazakhtelecom LLP and changed its name to Kcell Joint Stock Company in July 2012. The company was founded in 1998 and is based in Almaty, Kazakhstan. Kcell Joint Stock Company is a subsidiary of Fintur Holdings B.V.