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Kcell JSC reports 174% CAPEX growth while 12.7% Revenue decline

27 Jan 2017 • About Kcell JSC ($KCEL) • By InTwits

Kcell JSC reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Kcell JSC is a company in decline: FY2016 revenue growth was -12.7%, 5 years revenue CAGR was -3.8%
  • EBITDA Margin is declining: in FY2016 vs. 45.8% in FY2015 vs. 55.3% in FY2012
  • Kcell JSC has high CAPEX intensity: 5 year average CAPEX/Revenue was 14.2%. At the same time it's in pair with industry average of 13.4%.
  • CAPEX is quite volatile: 43,840 in FY2016, 15,985 in FY2015, 17,983 in FY2014, 17,313 in FY2013, 23,263 in FY2012
  • The company has highly profitable business model: ROIC is at 23.9%
  • It operates with medium-size leverage: Net Debt/EBITDA is 1.0x while industry average is 1.2x
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. KZT201220132014201520162016/2015
P&L
Revenue182,004187,599187,581168,424147,037-12.7%
Gross Profit105,712108,130103,36078,49255,171-29.7%
SG&A26,63122,21521,60225,13816.4%
EBITDA100,683104,727104,07977,179-100.0%
Net Income61,82863,39258,27146,63216,684-64.2%
Balance Sheet
Cash3,07518,91619,52031,5898,477-73.2%
Short Term Debt48,99124,72125,02050,20157,41514.4%
Long Term Debt00008,000
Cash flow
Capex23,26317,31317,98315,98543,840174.3%
Ratios
Revenue growth1.8%3.1%-0.0%-10.2%-12.7%
EBITDA growth-4.8%4.0%-0.6%-25.8%
Gross Margin58.1%57.6%55.1%46.6%37.5%-9.1%
EBITDA Margin55.3%55.8%55.5%45.8%0.0%-45.8%
Net Income Margin34.0%33.8%31.1%27.7%11.3%-16.3%
SG&A, % of revenue14.2%11.8%12.8%17.1%4.3%
CAPEX, % of revenue12.8%9.2%9.6%9.5%29.8%20.3%
ROIC63.7%66.0%62.9%40.2%23.9%-16.3%
ROE66.3%77.6%61.6%54.1%21.8%-32.3%
Net Debt/EBITDA0.5x0.1x0.1x0.2x-0.2x

Revenue and profitability


The company's Revenue dropped on 12.7% in FY2016.

Gross Margin decreased on 9.1 pp from 46.6% to 37.5% in FY2016. SG&A as a % of Revenue increased on 4.3 pp from 12.8% to 17.1% in FY2016.

Net Income marign dropped on 16.3 pp from 27.7% to 11.3% in FY2016.

Capital expenditures (CAPEX) and working capital investments


The company's CAPEX/Revenue was 29.8% in FY2016. Kcell JSC showed fast CAPEX/Revenue growth of 20.6 pp from 9.2% in FY2013 to 29.8% in FY2016. It's average CAPEX/Revenue for the last three years was 16.3%.

Return on investment


The company operates at high and attractive ROIC (23.91%) and ROE (21.79%). ROIC dropped on 16.3 pp from 40.2% to 23.9% in FY2016. ROE dropped on 32.3 pp from 54.1% to 21.8% in FY2016.

Leverage (Debt)


Debt jumped on 30.3% in FY2016 while cash dropped on 73.2% in FY2016.

Appendix 1: Peers in Mobile Telecommunications


Below you can find Kcell JSC benchmarking vs. other companies in Mobile Telecommunications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Zamano ($ZMNO)28.0%-16.5%23.9%22.3%
Sistema Jsfc ($SSAA)9.7%-44.6%8.7%10.6%
Sk Telecom ($SKMD)1.3%2.9%3.4%-0.2%
Megafon OJSC ($MFON)12.3%9.1%5.9%-0.4%
Monitise ($MONI)101.7%30.6%-5.7%-24.7%
 
Median (7 companies)9.7%2.9%5.9%-0.4%-40.3%
Kcell JSC ($KCEL)3.1%-0.0%-10.2%-12.7%


Top companies by Gross margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Sk Telecom ($SKMD)92.0%92.2%90.2%88.6%
Global Telecom Hldg Sae ($GLTD)57.6%82.1%83.4%81.8%
Megafon OJSC ($MFON)75.4%74.6%73.1%73.1%
Monitise ($MONI)66.4%75.8%64.9%51.8%57.5%
Sistema Jsfc ($SSAA)59.5%54.4%50.4%46.7%
 
Median (7 companies)59.5%74.6%64.9%51.8%42.6%
Kcell JSC ($KCEL)58.1%57.6%55.1%46.6%37.5%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Global Telecom Hldg Sae ($GLTD)50.8%12.1%42.8%43.9%
Megafon OJSC ($MFON)42.4%44.2%43.5%41.9%
Monitise ($MONI)-36.7%-5.1%-21.1%40.0%-58.6%
Sk Telecom ($SKMD)26.9%29.2%27.5%27.4%
Sistema Jsfc ($SSAA)20.1%33.3%23.9%22.5%
 
Median (7 companies)20.1%15.9%23.9%27.4%-32.4%
Kcell JSC ($KCEL)55.3%55.8%55.5%45.8%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Global Telecom Hldg Sae ($GLTD)8.6%15.7%36.5%26.2%
Megafon OJSC ($MFON)17.1%14.5%18.5%20.1%
Sistema Jsfc ($SSAA)11.3%13.3%14.2%15.0%
Sk Telecom ($SKMD)21.0%17.3%17.5%14.5%
Monitise ($MONI)8.7%7.0%5.1%4.6%1.3%
 
Median (7 companies)8.7%13.3%14.2%14.5%0.7%
Kcell JSC ($KCEL)12.8%9.2%9.6%9.5%29.8%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Mobile Streams ($MOS)216.7%11.3%24.0%-35.3%
Zamano ($ZMNO)31.4%30.9%25.5%23.3%
Megafon OJSC ($MFON)21.0%27.7%23.7%19.6%
Global Telecom Hldg Sae ($GLTD)17.8%-6.9%17.4%14.7%
Sistema Jsfc ($SSAA)11.7%12.1%8.3%7.4%
 
Median (7 companies)14.8%12.1%11.3%14.7%-91.8%
Kcell JSC ($KCEL)63.7%66.0%62.9%40.2%23.9%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Sistema Jsfc ($SSAA)2.0x1.5x2.7x3.5x
Global Telecom Hldg Sae ($GLTD)1.5x5.6x2.0x1.6x
Megafon OJSC ($MFON)1.2x1.1x1.4x1.5x
Sk Telecom ($SKMD)1.4x1.1x1.3x1.5x
Zamano ($ZMNO)-0.1x-0.8x-1.7x-2.1x
 
Median (7 companies)1.3x1.1x1.3x1.5x
Kcell JSC ($KCEL)0.5x0.1x0.1x0.2x


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