pair trade telia sonera vs. tele2
TRANSCRIPT
Pair Trade: Long TeliaSonera - Short Tele2
Tuesday, October 23rd 2012
Investment Case
Technical Comment
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Companies Description
Analysts Recommendations:
Source: Bloomberg
Market Price Data
TeliaSonera
Last Price (SEK) 44.480
YTD Change -4.90%
Mkt Cap (SEK bn) 192.602
Tele2
Last Price (SEK) 113.90
YTD Change -10.30%
Mkt Cap (SEK bn) 50.794
Source: Bloomberg
Market Multiples
P/E EPS DY Net Debt/
2013 CAGR 2013 EBITDA
Est. Est. Est. Est. 2012
TeliaSonera 10.38 0.61% 7.76% 1.59
Tele2 9.79 7.70% 10.64% 1.35
Source: Bloomberg
Next Report Date & Events
TeliaSonera YE Report: January 31th, 2013
Tele2 Cap. Mark. Day: Dec. 12th, 2012
Interim Rep.: February 5th, 2013
Source: Companies' web site
TeliaSonera (TLSN SS) faces a number of potential cash inflows that
could support the shares:
TeliaSonera sold its 8% indirect stake in Megafon in Q2, but only
received 20% of the total proceeds ($1.45bn). The rest should
be paid in four annual installments. Megafon is due to list via an
IPO;
In Spain, according to the press, TeliaSonera hired banks to
advise it on the sale of its Spanish business Yoigo;
In Kazakhstan, TeliaSonera could also be planning to IPO a stake
in its local company.
TeliaSonera intends to deleverage its Balance Sheet (although the
company’s net debt/EBITDA is not especially high by the standards of EU
telcos). But, will the company also return some cash through a special
dividend or a buyback? Key risk is market focus to shift back to the
fundamental story. Q3 2012 highlighted a deteriorating trend in Telia´s
Nordic assets.
Tele2 (TEL2B SS) has a solid business model. However, there are some
operational headwinds that could continue to hold back the stock:
No near-term award of spectrum in Russia. Will Tele2 fall
behind on mobile data, in Russia?
The company has not yet decided whether to bid for a 4th
license and roll out a mobile network in the Netherlands;
Investments in Russian and Kazakhstan could penalize Tele2’s
FCF yield.
The TeliaSonera / Tele2 ratio has a current value of 0.3905. We’ll define
as our price target 0.4033 (+3.27%). 0.3831 will be our stop-loss level
(-1.90%).