Page 156 - RusRPTDec21

but the scope for such expansion might be narrowing in a rising interest rates environment. This might limit the stock’s potential to re-rate further in the near term. Still, we think that the long-term potential for value creation remains intact. This balance of short-term and long-term considerations underlies our neutral view on the stock.
9.2.8 Telecoms corporate news
Rostelecom reported its 3Q21 IFRS results and held a conference call to
discuss them 9 November. We see the results and the comments from management during yesterday’s call as marginally positive for the stock. Revenue and EBITDA were broadly in line with our expectations, while net income undershot our and consensus projections by 32% and 25%, respectively. On the bright side, Rostelecom further upgraded its EBITDA growth outlook to 10-12% YoY, leaving some scope for consensus estimates to go higher. The company’s improved FCF generation should also support its plans to increase its FY21 dividend to RUB 6/share, implying dividend yields of c. 6.5% for ords and 7.1% for prefs.
RTC-IT is the flagship asset of RTC Data Centers, Rostelecom’s data center and cloud business. We think streamlining the ownership of RTC-IT is an important step in Rostelecom’s plans to take its data center and cloud business public. We also note that the deal valuation is quite attractive, on our estimates, as it implies an almost 85% discount to where global data center peers currently trade on average.
MTS may close the deal to sell telecom towers in Russia in 1H22. Kommersant reported, citing the company’s CEO, who added that MTS’ telecom towers (23,000 sites) are currently in the process of a spin-off and that negotiations are underway. According to Kommersant sources, potential buyers include Russian tower companies Service-Telecom (the buyer of Veon’s towers in Russia) and Vertical (the buyer of MegaFon’s towers) and that MTS wants to auction the tower portfolio by the year-end (potential estimate Rb90-100bn – unclear if that is an appraisal from a buyer or seller prospective). According to MTS’ CEO, the tower portfolio’s projected EBITDA for 2022 is Rb10bn.
9.2.10 Utilities & Renewables corporate news
Enel Russia is finally on track to deliver on its ESG-friendly strategy: no coal-fired assets are in the portfolio, the Azov wind farm launched in May 2021, and a second wind project, Kola, in the Murmansk region, is due for launch in 2022.
However, management has said Kola is facing challenges due to a new COVID-19 outbreak and weather conditions. Although management has reiterated both its profitability and dividend guidance, and the 9.8% DY for 2021F is secured, we see risks to the elevated 18.5% yield for 2022F (which includes the postponed dividend for 2020), as it is highly dependent on the commissioning of the second wind farm and capex. We maintain RUB1.00 12-month TP (25% ETR),
156 RUSSIA Country Report December 2021 www.intellinews.com