Consolidation - THE theme driving improved trends for EM Telcos
Communications
New Street expects many markets to consolidate further to just two operators, and in smaller, poorer countries, possibly a single network. Consolidation underpins much of the sector's improvement - most notably through reduced capex, as seen in Brazil, where industry capex dropped from $7bn to $4bn. Countries where further consolidation is likely include Colombia, Peru, Chile, Malaysia and many in sub-Saharan Africa. Key beneficiaries include Millicom, Airtel Africa, MTN, VEON and Entel. EM Telcos remain substantially undervalued on double digit equity FCF yields. Top regional picks include Singtel and KT (Asia), IHS Towers and Vodacom (Africa), and Liberty Latin America and TIM Brasil (LatAm).
Edition: 212
- 30 May, 2025
Consumer Staples
KT&G reported record-high quarterly revenues for the third quarter of 2023, with a significant contribution from its next-generation product (NGP) category. The company is also aiming to expand the production capacity of its NGP HTP business in response to the growing demand it has seen in domestic and overseas markets.
Edition: 175
- 08 December, 2023
Tobacco back en vogue?
Consumer Staples
After a multi-year decline in investment EM Tobacco stocks are turning a corner - Steven Copley notes that no other industry group is so underowned vs. its own history whilst also capturing positive rotation among active EM fund managers. Fund level activity between 30th Apr 2022 and 28th Feb 2023 highlights the widespread nature of the allocation shift. All Style groups saw investment levels rise, with 16 funds opening exposure to Tobacco vs. 1 closing over the period. GQG Partners EM Equity, Virtus EM Opportunity and BNY Mellon EM Income were among the larger buyers. ITC and KT&G dominate the holdings picture on a stock level, owned by 14.8% and 7.8% of managers, respectively.
Edition: 157
- 31 March, 2023
Korean Telcos: Lessons from Japan
Communications
Something is changing in the Korean Telco landscape - buybacks from SK Telecom and KT Corp, increased stock ownership by employees and management, an increased focus on profitability / returns, and more progressive dividend policies all point to a better environment for shareholders going forward. At the same time, post the spin out of SK Square, SKT, which has not historically been a rapid growth company, is now guiding to 50% revenue growth over the next 5 years! Taken together Korean Telcos which have historically traded at a substantial discount to the rest of the EM telecom sector look set to re-rate materially.
Edition: 126
- 07 January, 2022