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Globe Telecom (GLO PM) Summary

Core Content and Key Information

Globe Telecom (GLO) reported its 2013 results, with core net income reaching PHP11.62b, reflecting a 13% YoY increase and surpassing the expected full-year target by 2.5%. Service revenues reached PHP90.50b, up 9%, with 4Q13 revenues hitting a new quarterly record of PHP23.24b, up 9% YoY and 2% QoQ. The company maintains a HOLD rating with a target price of PHP1,582, a 9% discount from the current share price of PHP1,733.

Main Points

• Subscriber Growth: Mobile subscribers increased by 16% to 38.5m, while postpaid subscribers grew by 17% to 2.02m and prepaid by 16% to 36.45m.
• Data-Driven Growth: Data remained a key growth driver, with mobile browsing, broadband, and fixed-line data all showing double-digit growth. This led to higher core net income and expected elevated capital expenditures (capex) in the next couple of years.
• Capex Budget: For 2014, GLO has allocated USD600-650m in capex, with one-third of the budget dedicated to expanding and improving its data network, including LTE and broadband.
• Financial Performance:
  • EBITDA: Increased to PHP36.23b in 2013, with a margin of 40%, down from 42% in 2012.
  • Core Net Profit: Rose to PHP11.62b in 2013, up 13% YoY, and the estimate for FY14 core net profit is PHP12.65b, indicating an 11.3% growth.
  • Dividend Yield: Remains high at 4.3%, with an annualized dividend of PHP75 per share, and a payout ratio of 84%.
• Margin Pressures: Total operating expenses (OPEX) increased by 13% to PHP54b, outpacing the 9% growth in service revenues. This led to a decline in EBITDA margin and core net income growth being impacted by rising costs and a shift in sales mix.
• Financial Ratios:
  • Core P/E: Dropped to 18.3x in FY14E, indicating a potential undervaluation.
  • Net Debt/Equity: Declined to 87.2% in FY15E, suggesting improved financial leverage.
  • ROAE: Increased to 29.3% in FY14E, indicating strong returns on assets.
  • ROAA: Rose to 9.2% in FY14E, reflecting better returns on assets.

Key Trends and Outlook

• Sustained Growth: The company has seen sustained growth in its mobile, broadband, and fixed-line data segments, which are expected to continue driving revenue and profit growth.
• Subscriber Migration: The aggressive push towards smartphone usage is supporting the migration from prepaid to postpaid services, which is expected to continue.
• Challenges: Higher marketing expenses and SAC may impact margins, but the growth in data revenue is expected to offset these costs.
• Dividend Policy: GLO maintains a payout ratio of 75% to 90% of core net income, ensuring consistent dividend payments to shareholders.

Summary of Financial Highlights

Conclusion

Globe Telecom's 2013 results show strong core net income growth, driven by data usage and subscriber expansion. While OPEX growth has weighed on margins, the company's focus on data and postpaid migration is expected to continue driving profitability. The company maintains a HOLD rating with a target price of PHP1,582, indicating a cautious outlook pending further financial details. Dividend yield remains high, and the company is expected to maintain its dividend policy.