Mobile TeleSystems: Financially Stable But Lacks Clarity On Its Listing Strategy

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Summary

The company showed sustainable revenue growth in 1Q 2019.

However, the possible delisting from the NYSE is still a concern. The final decision about the company’s listing strategy is expected to be made in the end of summer.

Cautious investors still can receive a dividend this July and then sell the stock.

Mobile TeleSystems’ (or MTS) (NYSE:MBT) results for the first quarter of 2019 are mostly positive, though the company’s investment case is pretty tricky. On the one hand, the company consistently pays very decent dividends, which is the core of my bullish view on the company. On the other hand, MTS still has nothing to say about its listing strategy, and the company’s delisting from the NYSE is a huge risk for American investors. That said, a risk-free way to deal with the situation is to hold the stock, get the upcoming dividend payment and then sell the stock. In this case, you’ll get more than a 7% dividend yield. However, those investors who will continue to hold the stock until the end of the year will be rewarded with more than 10% dividend yield under the best of circumstances.

Earnings Analysis

The company’s revenue in the first quarter of 2019 increased by 9.4% compared to the first quarter of 2018 and amounted to 118 billion rubles.

The adjusted OIBDA grew by 6.1% Y-o-Y to a level of 55.3 billion rubles. The adjusted OIBDA margin fell to 46.9% versus 48.3% a year earlier.

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Net debt of the company at the end of the first quarter amounted to 292.4 billion rubles, increasing by 25.6% compared to the end of 2018. Net debt/OIBDA ratio rose to 1.3x. Despite the significant 25% increase in net debt compared to the end of 2018, the debt load is still at a comfortable level. In addition, the company is able to generate stable cash flows, which will allow reducing its debt without much difficulty, while maintaining dividends at a decent level.

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