Telecom Egypt CAPEX surged on 26.9% in 2016 and Revenue surged on 16.0%
13 Mar 2017 • About Telecom Egypt (
$TEEG) • By InTwits
Telecom Egypt reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 24.4% in 2016 vs. 25.7% in 2015 vs. 38.3% in 2012
- Telecom Egypt has high CAPEX intensity: 5 year average CAPEX/Revenue was 14.0%. At the same time it's in pair with industry average of 14.3%.
- CAPEX is quite volatile: 3,312 in 2016, 2,609 in 2015, 1,584 in 2014, 756 in 2013, 516 in 2012
- The company has potentially unprofitable business model: ROIC is at 5.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Telecom Egypt ($TEEG) key annual financial indicators
| mln. EGP | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 10,032 | 11,138 | 12,158 | 12,184 | 14,133 | 16.0% |
| Gross Profit | 4,152 | 4,671 | 5,371 | 5,064 | 6,301 | 24.4% |
| SG&A | | 2,682 | 167 | 1,956 | 2,698 | 37.9% |
| EBITDA | 3,842 | 3,684 | 3,560 | 3,126 | 3,450 | 10.4% |
| Net Income | 2,620 | 2,958 | 1,417 | 2,997 | 2,670 | -10.9% |
Balance Sheet
|
|---|
| Cash | 6,342 | 5,662 | 2,716 | 2,413 | 1,112 | -53.9% |
| Short Term Debt | 127 | 107 | 84 | 62 | 2,716 | 4,246.6% |
| Long Term Debt | 509 | 475 | 383 | 327 | 626 | 91.6% |
Cash flow
|
|---|
| Capex | 516 | 756 | 1,584 | 2,609 | 3,312 | 26.9% |
Ratios
|
|---|
| Revenue growth | 1.6% | 11.0% | 9.2% | 0.2% | 16.0% | |
| EBITDA growth | -19.9% | -4.1% | -3.3% | -12.2% | 10.4% | |
| Gross Margin | 41.4% | 41.9% | 44.2% | 41.6% | 44.6% | 3.0% |
| EBITDA Margin | 38.3% | 33.1% | 29.3% | 25.7% | 24.4% | -1.2% |
| Net Income Margin | 26.1% | 26.6% | 11.7% | 24.6% | 18.9% | -5.7% |
| SG&A, % of revenue | | 24.1% | 1.4% | 16.1% | 19.1% | 3.0% |
| CAPEX, % of revenue | 5.1% | 6.8% | 13.0% | 21.4% | 23.4% | 2.0% |
| ROIC | 6.7% | 6.7% | 6.6% | 4.9% | 5.7% | 0.7% |
| ROE | 9.3% | 10.5% | 5.1% | 10.8% | 9.1% | -1.7% |
| Net Debt/EBITDA | -1.5x | -1.4x | -0.6x | -0.6x | 0.6x | 1.3x |
Revenue and profitability
The company's Revenue surged on 16.0% in 2016. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.2 pp from 25.7% to 24.4% in 2016.
Gross Margin increased on 3.0 pp from 41.6% to 44.6% in 2016. SG&A as a % of Revenue increased on 3.0 pp from 16.1% to 19.1% in 2016.
Net Income marign decreased on 5.7 pp from 24.6% to 18.9% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 Telecom Egypt had CAPEX/Revenue of 23.4%. Telecom Egypt showed fast CAPEX/Revenue growth of 16.6 pp from 6.8% in 2013 to 23.4% in 2016. For the last three years the average CAPEX/Revenue was 19.3%.The company invested a big chunk of EBITDA (96.0%) to CAPEX to secure its growth.
Return on investment
The company operates at low ROIC (5.66%) and ROE (9.10%). ROIC increased slightly on 0.71 pp from 4.9% to 5.7% in 2016. ROE decreased slightly on 1.7 pp from 10.8% to 9.1% in 2016.
Leverage (Debt)
Debt level is 0.6x Net Debt / EBITDA and 1.0x Debt / EBITDA. Net Debt / EBITDA surged on 1.3x from -0.6x to 0.6x in 2016. Debt surged on 758% in 2016 while cash dropped on 53.9% in 2016.
Valuation
The company's trades at EV/EBITDA 0.6x and P/E 0.0x while industy averages are 15.6x and 19.1x. Telecom Egypt's EV/(EBITDA-CAPEX) is 16.1x with the industry average at 19.0x.
Appendix 1: Peers in Fixed Line Telecommunications
Below we provide Telecom Egypt 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 ($O2CZ) | | -5.2% | -22.0% | 0.0% | 0.4% |
| |
|---|
| Median (12 companies) | 37.6% | -4.1% | -1.6% | -0.4% | 0.1% |
|---|
| Telecom Egypt ($TEEG) | | 11.0% | 9.2% | 0.2% | 16.0% |
Top companies by Gross margin, %
| Top | 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% |
| Alternative Networks ($AN.) | 39.0% | 39.2% | 41.2% | 41.3% | 40.9% |
| Adept Telecom ($ADT) | 32.2% | 34.5% | 36.4% | 37.6% | 40.3% |
| |
|---|
| Median (4 companies) | 57.3% | 59.9% | 43.6% | 41.3% | 50.0% |
|---|
| Telecom Egypt ($TEEG) | 41.4% | 41.9% | 44.2% | 41.6% | 44.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Ooredoo Qsc ($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 (12 companies) | 32.0% | 32.0% | 31.9% | 29.9% | 30.6% |
|---|
| Telecom Egypt ($TEEG) | 38.3% | 33.1% | 29.3% | 25.7% | 24.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Orange Polska Sa ($OPLD) | 16.6% | 16.9% | 17.6% | 16.9% | 44.8% |
| Rostelekom ($RKMD) | 31.7% | 23.6% | 19.3% | 21.1% | 20.8% |
| Telefonica Sa ($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% |
| |
|---|
| Median (12 companies) | 13.6% | 13.8% | 12.9% | 14.0% | 13.5% |
|---|
| Telecom Egypt ($TEEG) | 5.1% | 6.8% | 13.0% | 21.4% | 23.4% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| O2 Czech Republic As ($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 (12 companies) | 11.2% | 9.7% | 8.7% | 8.2% | 8.6% |
|---|
| Telecom Egypt ($TEEG) | 6.7% | 6.7% | 6.6% | 4.9% | 5.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Orange Polska Sa ($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 ($BT.A) | 1.7x | 1.6x | 1.6x | 1.6x | 2.2x |
| |
|---|
| Median (12 companies) | 1.7x | 1.3x | 1.6x | 1.3x | 1.8x |
|---|
| Telecom Egypt ($TEEG) | -1.5x | -1.4x | -0.6x | -0.6x | 0.6x |
