European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<p><a href="https://www.smartkarma.com/entities/iliad-sa" target="_blank" data-smartkarma-citation="entities:21486:1" rel="noopener">Iliad SA (ILD FP)</a><a href="https://www.iliad.fr/presse/2020/CP_210920_Eng.pdf" target="_blank" rel="noopener">has announced</a> the acquisition of a 40% shareholding in Polish telecom operator <a href="https://www.smartkarma.com/entities/play-communications-sa" target="_blank" data-smartkarma-citation="entities:29661:1" rel="noopener">Play Communications SA (1P1 GR)</a> and its intention to acquire the remaining 60% via a tender offer. This implies a premium of 38.8% on the last trading session prior to announcement, 7.2x EV/LTM EBITDA and <strong>6.4x EV/NTM EBITDA</strong>, which seems fair, in my view. The offer has unanimous support from both iliad and Play’s boards.</p>
<ul>
<li>Play's share price has increased by 36.7% vs. prior closing, while Iliad's share price has lost 3%.</li>
</ul>
<p>This deal fits with the expansion of iliad across Europe, following acquisitions in Ireland and Italy.</p>
<p>The transaction will be cash and debt funded. iliad’s leverage ratio would increase from 2.2x at end-June 2020 to 3.2.x on a pro forma basis, but iliad intends to gradually deleverage following the acquisition.</p>
<ul>
<li>iliad has c. EUR1.57 bn in undrawn lines and EUR 1 bn in cash and equivalents.</li>
</ul>
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<div>
<p>Iliad management highlighted the following <strong>deal rationale</strong>:</p>
<ul>
<li>opportunity to enter one of the largest European markets at fair value;</li>
<li>international diversification;</li>
<li>value creation: opportunity to leverage Iliad’s expertise to transform Play into a full fledged operator (thus profiting from the expected growth of the fixed Polish market (~50% penetration) and operational optimisation;</li>
<li>allows conservative leverage and +79% EPS accretion since 2021.</li>
</ul>
</div>
</div>
</div>
<p>The <strong>gross spread on the deal is 1.5%</strong>, while not terribly exciting, the estimated settlement is just nine weeks ahead. The recommendation is <strong>long Play</strong>.</p>
<p>Some savvy investors and telco operators are taking advantage of the share price weakness of the European telecom sector: <a href="https://www.smartkarma.com/entities/masmovil-ibercom-sa" target="_blank" data-smartkarma-citation="entities:29013:1" rel="noopener">Masmovil Ibercom (MAS SM)</a> , <a href="https://www.smartkarma.com/entities/altice-europe-nv" target="_blank" data-smartkarma-citation="entities:1060:1" rel="noopener">Altice NV A (ATC NA)</a> and now Play are the recently announced deals. Play’s rivals Orange Polska SA and Cyfrowy Polsat SA gained 3.2% and 1.5% respectively on today's trading.</p>

Iliad SA (ILD FP)has announced the acquisition of a 40% shareholding in Polish telecom operator Play Communications SA (1P1 GR) and its intention to acquire the remaining 60% via a tender offer. This implies a premium of 38.8% on the last trading session prior to announcement, 7.2x EV/LTM EBITDA and 6.4x EV/NTM EBITDA, which seems fair, in my view. The offer has unanimous support from both iliad and Play’s boards.

Play's share price has increased by 36.7% vs. prior closing, while Iliad's share price has lost 3%.

This deal fits with the expansion of iliad across Europe, following acquisitions in Ireland and Italy.
The transaction will be cash and debt funded. iliad’s leverage ratio would increase from 2.2x at end-June 2020 to 3.2.x on a pro forma basis, but iliad intends to gradually deleverage following the acquisition.

iliad has c. EUR1.57 bn in undrawn lines and EUR 1 bn in cash and equivalents.




Iliad management highlighted the following deal rationale:

opportunity to enter one of the largest European markets at fair value;
international diversification;
value creation: opportunity to leverage Iliad’s expertise to transform Play into a full fledged operator (thus profiting from the expected growth of the fixed Polish market (~50% penetration) and operational optimisation;
allows conservative leverage and +79% EPS accretion since 2021.




The gross spread on the deal is 1.5%, while not terribly exciting, the estimated settlement is just nine weeks ahead. The recommendation is long Play.
Some savvy investors and telco operators are taking advantage of the share price weakness of the European telecom sector: Masmovil Ibercom (MAS SM) , Altice NV A (ATC NA) and now Play are the recently announced deals. Play’s rivals Orange Polska SA and Cyfrowy Polsat SA gained 3.2% and 1.5% respectively on today's trading.

Play Communications - Iliad: Offer Announcement

Global Senior Analyst, Fundamental Equity Research

Emile Farsoun

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/ck-hutchison-holdings-ltd" target="_blank" data-smartkarma-citation="entities:132:1" rel="noopener">CK Hutchison Holdings (1 HK)</a> has underperformed the HSI index by roughly 10% year-to-date. This is mainly due to the cloudy outlook, stemming from weakening economies in Hong Kong, US-China trade war impact, and a hard Brexit.</p>
<p>CH Hutchinson is a Hong Kong based conglomerate, the flagship holding company of Li Ka-Shing, whose family owns 30.15%. The Company operates its business through five segments: the Retail segment, the Telecommunications segment, the Infrastructure segment, the Ports and Related Services segment, and the Husky Energy segment.</p>
<p>Currently, the stock is trading at a 40% discount to NAV, which discounts a worst case scenario, and sets up the stock for outperformance for long term investors, as most of the concerns turn out less than feared. The stock has a 4.35% dividend yield, providing decent income for patient investors. The implied valuation is attractive with an 8.5% FCF yield, forward P/E of 6.7x, and forward EV/EBITDA of 9.9x.</p>
<p>The current valuation offers an attractive entry point for the stock, given the mid single digit earnings growth, driven by stabilization for the Italian Telecom operation, along with the robust growth for the Retail and Energy businesses.</p>

CK Hutchison Holdings (1 HK) has underperformed the HSI index by roughly 10% year-to-date. This is mainly due to the cloudy outlook, stemming from weakening economies in Hong Kong, US-China trade war impact, and a hard Brexit.
CH Hutchinson is a Hong Kong based conglomerate, the flagship holding company of Li Ka-Shing, whose family owns 30.15%. The Company operates its business through five segments: the Retail segment, the Telecommunications segment, the Infrastructure segment, the Ports and Related Services segment, and the Husky Energy segment.
Currently, the stock is trading at a 40% discount to NAV, which discounts a worst case scenario, and sets up the stock for outperformance for long term investors, as most of the concerns turn out less than feared. The stock has a 4.35% dividend yield, providing decent income for patient investors. The implied valuation is attractive with an 8.5% FCF yield, forward P/E of 6.7x, and forward EV/EBITDA of 9.9x.
The current valuation offers an attractive entry point for the stock, given the mid single digit earnings growth, driven by stabilization for the Italian Telecom operation, along with the robust growth for the Retail and Energy businesses.

CK Hutchison (1HK): Cloudy Outlook, yet Valuation Underpinned by Strong Free Cash Flow

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p>On 30 August 2018, <a href="https://www.smartkarma.com/entities/323" target="_blank" data-smartkarma-citation="entities:323:1">TPG Telecom Ltd (TPM AU)</a> announced the recommended merger of equals with Vodafone Hutchison Australia (VHA). The consensus view was that the Australian Competition and Consumer Commission (ACCC) would approve the merger before the release of ACCC’s statement of issues. However, recent events suggest that regulatory approval from the ACCC is far from a sure thing.</p><div class="content-highlight"><p>We believe that TPG’s current share price provides limited upside should the ACCC approve the merger. On the other hand, there is material downside risk should the ACCC block the merger. Consequently, the risk-reward is skewed towards the downside.</p></div>

On 30 August 2018, TPG Telecom Ltd (TPM AU) announced the recommended merger of equals with Vodafone Hutchison Australia (VHA). The consensus view was that the Australian Competition and Consumer Commission (ACCC) would approve the merger before the release of ACCC’s statement of issues. However, recent events suggest that regulatory approval from the ACCC is far from a sure thing.We believe that TPG’s current share price provides limited upside should the ACCC approve the merger. On the other hand, there is material downside risk should the ACCC block the merger. Consequently, the risk-reward is skewed towards the downside.

TPG Telecom/VHA Merger: Risk-Reward Is Skewed Towards the Downside

Differentiated global TMT & Internet Research

New Street Research Insights

New Street Research

Research is provided by our team of experienced analysts. Our work is idea driven, based on independence of thought, sector expertise, and firmly focused on fundamentals and valuation of telecoms and internet names globally. New Street is headquartered in London with offices in New York, Singapore and Australia. 

New Street Research is an independent, partner-owned, research firm specialising in equity and debt research. Our equity research embraces the following sectors:

Pan European Telecom Services and Cable
US Telecoms, Cable, Satellite and Towers
Global Emerging Market Telecoms
Japan Telecoms
Asian Internet
Pan European Healthcare
US Healthcare
Japanese Healthcare

We also provide debt research on:
Pan European Telecom Services and Cable

Thematic (Sector/Industry)

<p>A quick tour of news flow in the Asian telco space in the past week. </p><h2>China: China Tower IPO, SOE reform and 5G</h2><p><strong>China Tower IPO:</strong> The massive <a href="https://www.smartkarma.com/entities/27037" target="_blank" data-smartkarma-citation="entities:27037:1">China Tower Corp (1409417D HK)</a> IPO is upon us and if reports are to be believed the IPO is looking to raise $8.8bn by selling a 25% stake and valuing the company at US$35bn (with a greenshoe of 15%). It looks like the IPO will open on July 23rd with pricing on 1 August. We have written on this before (see <a href="https://www.smartkarma.com/insights/china-tower-ipo-a-low-return-entity-created-to-boost-telco-returns" target="_blank" data-smartkarma-citation="insights:21790">China Tower IPO - A Low Return Entity Created to Boost</a>…</p>

A quick tour of news flow in the Asian telco space in the past week. China: China Tower IPO, SOE reform and 5GChina Tower IPO: The massive China Tower Corp (1409417D HK) IPO is upon us and if reports are to be believed the IPO is looking to raise $8.8bn by selling a 25% stake and valuing the company at US$35bn (with a greenshoe of 15%). It looks like the IPO will open on July 23rd with pricing on 1 August. We have written on this before (see China Tower IPO - A Low Return Entity Created to Boost…

This Week in Asian Telcos: China Tower IPO the Key Event to Watch Out For

<p><a href="https://www.smartkarma.com/entities/14026" target="_blank" data-smartkarma-citation="entities:14026:1">VEON (VEON US)</a> announced a group restructuring that involved selling its 50% holding in Wind Tre (Wind) in Italy to <a href="https://www.smartkarma.com/entities/132" target="_blank" data-smartkarma-citation="entities:132:1">CK Hutchison Holdings (1 HK)</a> (Hutch) and taking 100% control of subsidiaries in Pakistan and Bangladesh from its affiliate (<a href="https://www.smartkarma.com/entities/25491" target="_blank" data-smartkarma-citation="entities:25491:1">Global Telecom Holding (GTHE EY)</a>). From the VEON point of view we like the transaction - they are receiving a good valuation for the Italian assets (6.7x EBITDA) and paying a low valuation for the EM assets in Pakistan and Bangladesh. VEON has abandoned its EM…</p>

VEON (VEON US) announced a group restructuring that involved selling its 50% holding in Wind Tre (Wind) in Italy to CK Hutchison Holdings (1 HK) (Hutch) and taking 100% control of subsidiaries in Pakistan and Bangladesh from its affiliate (Global Telecom Holding (GTHE EY)). From the VEON point of view we like the transaction - they are receiving a good valuation for the Italian assets (6.7x EBITDA) and paying a low valuation for the EM assets in Pakistan and Bangladesh. VEON has abandoned its EM…

CK Hutchison Doubling Down in Italy as VEON Exits at a Good Valuation

France

Iliad S.A. provides a wide range of telecommunications services which include national telecommunication and dial-up, and high speed DSL and TV Internet access.

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Iliad SA (ILD FP)

Play Communications - Iliad: Offer Announcement

Some savvy investors and tel

Jesus Rodriguez Aguilar

CK Hutchison (1HK): Cloudy Outlook, yet Valuation Underpinned by Strong Free Cash Flow

CK Hutchison Holdings (1 HK) has underperformed the HSI index by roughly 10% year-to-date. This is mainly due to the cloudy outlook, stemming from...

Emile Farsoun

TPG Telecom/VHA Merger: Risk-Reward Is Skewed Towards the Downside

On 30 August 2018, TPG Telecom Ltd (TPM AU) announced the recommended merger of equals with Vodafone Hutchison Australia (VHA). The consensus view...

Arun George

This Week in Asian Telcos: China Tower IPO the Key Event to Watch Out For

A quick tour of news flow in the Asian telco space in the past week. China: China Tower IPO, SOE reform and 5GChina Tower IPO: The massive China...

New Street Research

CK Hutchison Doubling Down in Italy as VEON Exits at a Good Valuation

VEON (VEON US) announced a group restructuring that involved selling its 50% holding in Wind Tre (Wind) in Italy to CK Hutchison Holdings (1...

New Street Research

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