Sluggishness of activity in Africa, constraint of the ANRT, pressures on the treasury,… BMCE Capital Global Research quotes a series of constraints which weigh on the financial performance of the incumbent operator in a new research note published on August 12. BKGR is revising its target price there, bringing it down from 127 DH to 112.8 DH, i.e. a potential drop of more than 5% compared to current levels.
Although the operator manages to raise the bar in Morocco – the drop in turnover being less significant in the Kingdom than in H1 of the previous year – The research office notes a slowdown in Africa with income from subsidiaries a timid increase of +0.4% mitigated in particular by a negative currency effect (variation of +1.6% at constant currency) and the drop in call terminations in several sub-Saharan countries. The Mobile Data segment, on the other hand, remains very dynamic (+29% at constant exchange rates) and partly offsets the slowdown in growth of MOOV AFRICA.
Operational indicators weighed down by an ANRT penalty
At the purely operational level and despite competitive constraints, the MAROC TELECOM Group manages to strengthen its operational efficiency with a Group adjusted EBITA margin and Group adjusted EBITDA up +1.3 pts to 32.7% and +0 .7 pt 52.2% respectively thanks to better control of purchases consumed and the reduction in depreciation charges. Nevertheless, the incumbent operator saw its reported EBITA plummet by -40.8% to MAD 3,287m following the full provisioning of the MAD 2.45bn penalty imposed by the ANRT. Previously, MAROC TELECOM had already suffered a record fine of MAD 3.3 billion in 2020 linked to this same case, recalls BKGR.
A level of distribution supported by debt
Another element mentioned by BKGR: The level of distribution of IAM could suffer from the penalty imposed by the Moroccan telecommunications regulator and its significant impact on the company’s net income.
Indeed, the Group should, according to BKGR’s expectations, be faced with a dilemma, forcing it either to lower its payout in 2022, or to resort to financing debts in order to preserve its status as a yield value.
“From our point of view, we estimate that, in all likelihood, IAM should resort to a higher level of debt in order to cover the amount of the penalty payment (MAD 2.45 billion), made possible thanks to its financial flexibility. to maintain its level of distribution without compromising its investment program on the eve of the launch of calls for tenders for 5G licenses“., analyse BKGR.
Thus, the level of payout should increase to around 137% in 2022E, revealing a projected DPA of 5.00 DH against MAD 4.78 in 2021. Note that in 2019, following the ANRT fine of MAD 3.3 billion, MAROC TELECOM’s payout rose to 149%, compared to 95% in 2018 and its Gearing had jumped by +38 points to nearly 109%. But beware, continued debt relief from MAROC TELECOM cannot be ruled out, which could lead to a sharp drop in the distribution of dividends. In this case, the operator should adopt a midpoint payout of 75%, which corresponds to a DPA of MAD 3.21 in 2022E for a yield of 2.7% (vs. 3.4% in 2021).
In terms of forecasts, BKGR anticipates A consolidated turnover down -2.5% in 2022, A less pronounced drop in Group EBITDA than that of turnover (-2% to MAD 18.2 billion) and a contraction of net income by -13.1% to MAD 5.2bn given the impact of the penalty imposed by the ANRT in H1 2022.