Crnogorski Telekom - 2Q09 results

Crnogorski Telekom has reported non-consolidated financial figures for 2Q09. Total EBITDA came in at € 10.5m for 2Q09, up 9.7% q/q and down 8.2% y/y. The outcome was broadly in line with our forecast. Crnogorski Telekom reported EBITDA at € 20.1m for 1H09, representing 48.7% of our full-year forecast. The firm has not made its common-size consolidated statements available yet. Coverage of the stock is fairly weak and no consensus estimates were available for the 2Q09 results.

Total revenues came in at € 31.1m for 2Q09, up 11.1% q/q and down 11.8% y/y on the back of the continued fixed-to-mobile substitution trend and declining mobile phone tariffs. Declining wholesale traffic was the result of transit traffic being rerouted from Montenegro to Serbia by mobile competitor Promonte. Internet revenues showed a further sharp increase due to the number of ADSL and IPTV users rising from 19,309 to 22,013 in the period. Fixed telephony revenues came in at € 16.5m in 2Q09, up 7.0% q/q and down 9.5% y/y, in line with our forecast. The growing mobile segment customer base was unable to offset declining margins and the negative impact of the poor tourist season in Montenegro in 2Q09. Mobile telephony revenues came in at € 14.6m in 2Q09, up 16.2% q/q and down 14.3% y/y, broadly in line with our forecast.

Total EBITDA came in at € 10.5m for 2Q09, up 9.7% q/q and down 8.2% y/y. Despite the deteriorating economic conditions, Crnogorski Telekom managed to sustain a relatively stable operating performance through 2Q09, with the EBITDA margin at 33.8%, down 44bp q/q, up 136bp y/y and above our forecast of 32.9%. The slightly lower EBITDA in 2Q09 versus 1Q09 was due to higher salaries and employee costs.

Crnogorski Telekom currently trades at € 2.5 per share, way below our fair value, and at an 82% discount to the firm’s 2009F EV/EBITDA of 0.8x. The company paid an extraordinary dividend of € 1.06 per share (dividend yield of 42.6%) from 2008 earnings, significantly above the average dividend yield for peers. We expect the published financial reports to have a neutral trading impact.