Rostelekom EBITDA decreased on 3.8% in 2016 and Revenue showed almost no change
06 Mar 2017 • About Rostelekom (
$RKMD) • By InTwits
Rostelekom reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Rostelekom has high CAPEX intensity: 5 year average CAPEX/Revenue was 23.3%. At the same time it's a lot of higher than industry average of 14.1%.
- CAPEX is quite volatile: 27,421 in 2016, 25,019 in 2015, 12,232 in 2014, 10,772 in 2013, 11,290 in 2012
- The company has business model with low profitability: ROIC is at 8.4%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.9x while industry average is 1.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Rostelekom ($RKMD) key annual financial indicators
| mln. RUB | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 295,341 | 290,736 | 298,937 | 297,355 | 297,446 | 0.0% |
| SG&A | | | | 5,174 | 5,321 | 2.8% |
| EBITDA | 117,381 | 113,476 | 98,746 | 99,185 | 95,425 | -3.8% |
| Net Income | 32,677 | 23,872 | 37,520 | 13,944 | 11,751 | -15.7% |
Balance Sheet
|
|---|
| Cash | 13,629 | 7,960 | 16,945 | 7,165 | 4,257 | -40.6% |
| Short Term Debt | 65,016 | 33,209 | 52,142 | 58,305 | 62,595 | 7.4% |
| Long Term Debt | 152,874 | 184,600 | 137,872 | 126,620 | 124,510 | -1.7% |
Cash flow
|
|---|
| Capex | 93,665 | 68,487 | 57,666 | 62,726 | 61,857 | -1.4% |
Ratios
|
|---|
| Revenue growth | -0.2% | -1.6% | 2.8% | -0.5% | 0.0% | |
| EBITDA growth | -2.8% | -3.3% | -13.0% | 0.4% | -3.8% | |
| EBITDA Margin | 39.7% | 39.0% | 33.0% | 33.4% | 32.1% | -1.3% |
| Net Income Margin | 11.1% | 8.2% | 12.6% | 4.7% | 4.0% | -0.7% |
| SG&A, % of revenue | | | | 1.7% | 1.8% | 0.0% |
| CAPEX, % of revenue | 31.7% | 23.6% | 19.3% | 21.1% | 20.8% | -0.3% |
| ROIC | 11.2% | 9.7% | 8.7% | 8.2% | 8.4% | 0.2% |
| ROE | 13.2% | 11.0% | 17.2% | 5.7% | 4.8% | -0.9% |
| Net Debt/EBITDA | 1.7x | 1.8x | 1.8x | 1.8x | 1.9x | 0.1x |
Revenue and profitability
Rostelekom's Revenue showed almost no change in 2016. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 10.3 pp from 49.2% to 38.9% in 2016.
SG&A as a % of Revenue showed almost no change in 2016.
Net Income marign decreased slightly on 0.74 pp from 4.7% to 4.0% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 Rostelekom had CAPEX/Revenue of 20.8%. Rostelekom showed decline in CAPEX/Revenue of 2.8 pp from 23.6% in 2013 to 20.8% in 2016. For the last three years the average CAPEX/Revenue was 20.4%.Rostelekom maintained rich investment policy and has spent a big chunk of EBITDA (64.8%) to CAPEX.
Return on investment
The company operates at low ROIC (8.38%) and ROE (4.80%). ROIC showed almost no change in 2016. ROE decreased slightly on 0.93 pp from 5.7% to 4.8% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.9x and Debt / EBITDA is 2.0x. Net Debt / EBITDA jumped on 0.1x from 1.8x to 1.9x in 2016. Debt increased slightly on 1.2% in 2016 while cash dropped on 40.6% in 2016.
Valuation
The company's trades at EV/EBITDA 1.9x and P/E 0.0x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 5.4x with the industry average at 19.0x.
Appendix 1: Peers in Fixed Line Telecommunications
Below we provide Rostelekom benchmarking against other companies in Fixed Line 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Adept Telecom ($ADT) | | -4.1% | -0.8% | 5.8% | 30.9% |
| BT Group ($BT.A) | | -4.2% | 1.0% | -1.7% | 5.9% |
| Kt Corp ($KTCD) | | -0.2% | -1.6% | -4.9% | 2.1% |
| Ooredoo Qsc ($ORDS) | | 1.1% | -1.9% | -3.2% | 1.1% |
| O2 Czech Republic As ($O2CZ) | | -5.2% | -22.0% | 0.0% | 0.4% |
| |
|---|
| Median (11 companies) | 19.6% | -4.1% | -1.6% | 0.0% | 0.1% |
|---|
| Rostelekom ($RKMD) | | -1.6% | 2.8% | -0.5% | 0.0% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kt Corp ($KTCD) | 75.5% | 76.0% | 77.9% | 77.9% | 78.5% |
| Verizon Communications Inc ($VZC) | 60.1% | 62.8% | 60.7% | 60.1% | 59.2% |
| Telecom Egypt ($TEEG) | 41.4% | 41.9% | 44.2% | 41.6% | |
| Alternative Networks ($AN.) | 39.0% | 39.2% | 41.2% | 41.3% | 40.9% |
| Syqic ($SYQ) | 57.3% | 59.9% | 43.6% | 41.2% | |
| |
|---|
| Median (6 companies) | 49.4% | 50.9% | 43.9% | 41.5% | 50.0% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Ooredoo Qsc ($ORDS) | 46.0% | 42.4% | 37.6% | 39.2% | 44.8% |
| Koninklijke Kpn Nv ($0O8F) | 35.9% | 34.1% | 39.1% | 33.2% | 35.7% |
| Verizon Communications Inc ($VZC) | 25.6% | 40.3% | 28.4% | 37.3% | 34.1% |
| BT Group ($BT.A) | 31.2% | 32.0% | 31.9% | 33.5% | 33.4% |
| Hellenic Telecom.Organization S.A. ($OTES) | 32.0% | 28.8% | 35.4% | 31.3% | 32.4% |
| |
|---|
| Median (11 companies) | 32.0% | 32.0% | 31.7% | 29.1% | 29.1% |
|---|
| Rostelekom ($RKMD) | 39.7% | 39.0% | 33.0% | 33.4% | 32.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Orange Polska Sa ($OPLD) | 16.6% | 16.9% | 17.6% | 16.9% | 44.8% |
| Telefonica Sa ($TDE) | 15.2% | 17.0% | 19.1% | 18.7% | 17.7% |
| Ooredoo Qsc ($ORDS) | 21.9% | 27.5% | 25.3% | 26.5% | 17.2% |
| Hellenic Telecom.Organization S.A. ($OTES) | 11.7% | 14.8% | 15.4% | 16.9% | 16.7% |
| Verizon Communications Inc ($VZC) | 14.0% | 13.8% | 13.5% | 13.5% | 13.5% |
| |
|---|
| Median (11 companies) | 13.5% | 13.7% | 12.9% | 14.0% | 13.5% |
|---|
| Rostelekom ($RKMD) | 31.7% | 23.6% | 19.3% | 21.1% | 20.8% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| O2 Czech Republic As ($O2CZ) | 11.8% | 11.7% | 7.2% | 14.5% | 26.8% |
| BT Group ($BT.A) | 23.6% | 27.0% | 34.7% | 37.5% | 21.6% |
| Adept Telecom ($ADT) | 11.6% | 15.5% | 13.2% | 14.3% | 16.4% |
| Verizon Communications Inc ($VZC) | 8.0% | 16.7% | 10.1% | 19.3% | 15.4% |
| Alternative Networks ($AN.) | 35.2% | 33.7% | 28.5% | 20.2% | 15.2% |
| |
|---|
| Median (11 companies) | 9.6% | 8.5% | 7.7% | 7.1% | 8.8% |
|---|
| Rostelekom ($RKMD) | 11.2% | 9.7% | 8.7% | 8.2% | 8.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Orange Polska Sa ($OPLD) | 1.0x | 1.1x | 1.0x | 1.2x | 5.1x |
| Telefonica Sa ($TDE) | 2.5x | 2.5x | 3.6x | 4.2x | 3.6x |
| Koninklijke Kpn Nv ($0O8F) | 3.8x | 3.4x | 3.0x | 3.6x | 3.1x |
| Verizon Communications Inc ($VZC) | 1.7x | 0.8x | 2.8x | 2.1x | 2.4x |
| BT Group ($BT.A) | 1.7x | 1.6x | 1.6x | 1.6x | 2.2x |
| |
|---|
| Median (11 companies) | 1.6x | 1.1x | 1.4x | 1.2x | 1.7x |
|---|
| Rostelekom ($RKMD) | 1.7x | 1.8x | 1.8x | 1.8x | 1.9x |
