(26,39 EUR, -0,17%) will publish its 1Q11 results on Friday 6 May before market, followed by a conference call at 2pm CET. Regulatory impacts will likely trigger a 1% sales decline and a 2% lower REBITDA, while EBITDA and net income will be down sharply y/y after 1Q10 saw a large one-off gain from the BICS/MTN transaction. We expect an uneventful release. Hold rating and € 26.3 target maintained.
1Q11E –regulation weighs: Mainly due to regulation (another MTR cut from 1 January 2011), 1Q revenues in CBU and EBU will probably be down about 2%, and this will only partly be offset by growth in ICS. On a group level, we arrive at a 1% sales decline. REBITDA is forecast to be down about 2% y/y. 1Q10 EBITDA was supported by a € 436m one-off gain on the BICS/MTN transaction, so 1Q11 EBITDA and net income will be down sharply y/y. Our estimates are in line with consensus expectations.
No changes to FY outlook expected: In terms of FY11 guidance, has guided for up to 1% lower sales and up to 2% lower EBITDA. Our and consensus forecasts are in line with these targets and we do not expect changes to the company’s outlook statements.
offers an attractive defensive profile but this comes at a fairly high (relative) valuation, with a premium – that we feel is unwarranted –to European incumbents of 5% to 10% on (adjusted) EV/REBITDA11. The stock is therefore still quite expensive from a European perspective while earnings remain under pressure. The 100% consolidation of BICS supported the reported FY10 sales and EBITDA numbers, but on an underlying basis, EBITDA remains under pressure due to regulation and competition. Hold rating and € 26.3 target maintained.