Telcos: Q4 first time ever all EU markets are in positive growth

Communications

New Street Research

Service revenue growth remains at record highs (+2.2% Y/Y in Q4, the highest growth rate the sector has achieved over the last 10+ years) and for the first time all markets have positive growth (between +1-5% Y/Y). EBITDA growth also improved, while capex appears to have peaked. OpFCF was +17.5% Y/Y in Q4 and +5.2% for the full year. This was the second quarter in a row of ROCE growth (it is now back above 8% for the first time in 2 years). New Street strongly believes the good service revenue growth will filter through to permanently better FCF and higher ROCE thanks to the improving regulatory environment. Their current top picks are BT, DT, Orange, Telenor, Telia and Vodafone.

- 19 April, 2024

Orange (ORA FP) France

Communications

Arete Research

Squeezing the juice - consensus is not pricing in peak capex. Market scepticism over weak dividend cover should dissipate as FCF doubles by ’24E, with further potential upside from Masmovil JV. The possibility of Totem merging with Vantage Towers is ORA’s €9bn hidden gem, which further fuels the positive train. Meanwhile, the French outlook remains bullish and should the possibility of consolidation become a reality, this will also play in ORA’s favour. TP increased to €16 with a 57% TSR by YE23E (excluding potential for special dividends).

- 08 July, 2022

Brazil and LatAm poised for outperformance

The agricultural powerhouse that is Brazil boasts extensive production in commodities ranging from sugar and coffee to orange juice and soybeans. In a world obsessed with inflation, Brazil should be an excellent hedge. John Karle expects more investment dollars to flow to LatAm if volatility continues to expand globally, especially in the wake of the Ukraine crisis. He adds a third unit of risk exposure to the iShares EWZ ETF to capture the anticipated returns, with a closing stop of $29 on the entire thesis.

- 04 March, 2022