Kcell Joint Stock Company — Navigating challenging times

Kcell Joint Stock Company (Kazakhstan Stock Exchange: KCEL)

Last close As at 12/07/2024

5.25

0.00 (0.00%)

Market capitalisation

1,050m

More on this equity

Research: TMT

Kcell Joint Stock Company — Navigating challenging times

Despite the disruption caused by COVID-19, Kcell delivered both revenue and profit growth in Q2. Impressive handset sales (up 62% y-o-y) offset the impact of a consumer spending slowdown and an exit from off-net bulk SMS. With Kazakhstan entering a new lockdown, the outlook remains uncertain. Yet Q2 clearly shows Kcell’s resilience and longer term the scope for group synergies in a consolidated market should drive healthy profit growth.

Analyst avatar placeholder

Written by

TMT

Kcell Joint Stock Company

Navigating challenging times

Q2 results

Telecoms

5 August 2020

Price (GDR)

US$6.25

Market cap

US$1,250m

KZT421/US$

Net debt (KZTbn) H1FY20

66.5

Shares in issue

200m

Free float

25%

Code

KCEL

Exchanges

KASE, AIX, LSE

Share price performance

%

1m

3m

12m

Abs

5.9

6.8

36.5

Rel (local)

N/A

N/A

N/A

52-week high/low

US$6.25

US$4.41

Business description

Kcell Joint Stock Company (Kcell) is a mobile operator in Kazakhstan and a listed subsidiary of Kazakhtelecom (KT), a state-owned incumbent with a 70% share of the market. Consolidation is delivering dramatic improvements in the market and as a subsidiary of the dominant operator, Kcell is well positioned to benefit.

Next events

Q1 results

29 April 2020

Analyst

Dan Gardiner

+44 (0)20 3077 5700

Kcell Joint Stock Company is a research client of Edison Investment Research Limited

Despite the disruption caused by COVID-19, Kcell delivered both revenue and profit growth in Q2. Impressive handset sales (up 62% y-o-y) offset the impact of a consumer spending slowdown and an exit from off-net bulk SMS. With Kazakhstan entering a new lockdown, the outlook remains uncertain. Yet Q2 clearly shows Kcell’s resilience and longer term the scope for group synergies in a consolidated market should drive healthy profit growth.

Year end

Revenue (KZTbn)

Adj EBITDA* (KZTbn)

Adj EPS* (KZT)

EV/Adj* EBITDA (x)

P/E
(x)

FCF yield
(%)

Div yield
(%)

12/19

156.7

63.5

103

9.1

25.6

2.9

1.1

12/20e

155.1

64.8

98

8.9

27.0

6.2

1.7

12/21e

159.8

68.4

121

8.5

21.7

6.4

4.7

12/22e

170.5

71.9

136

8.1

19.3

6.7

4.8

Note: *EBITDA and EPS are adjusted to exclude amortisation of acquired intangibles and exceptional items.

Contrasting trends

Q2 saw revenue grow 2% y-o-y, but reflected contrasting trends. Consumer service revenues (74% of sales) fell 4.2% y-o-y (vs a 5.9% rise in Q1) as Kcell indicated that COVID-19 had affected both usage and spending patterns. However, the hit to handset sales proved less than we feared. A pivot to the online channel and the launch of iPhone SE saw handset sales grow 62% y-o-y, helping to offset the consumer slowdown and the exit from zero margin ‘off-net bulk SMS’ sales. Core business revenues continued to grow healthily (up 20% y-o-y vs 22% in Q1 – see Exhibit 1).

Navigating the impact

The combination of falling sales and marketing expenses plus lower depreciation charges saw underlying operating profit up 7.9% y-o-y. These benefits were largely mitigated by a higher tax charge, but underlying EPS of KZT23.6 was still up 2%. FCF of KZT11.4bn represented a margin of 29.6%.

Mix changes but profit forecasts largely intact

With the country recently entering a new lockdown Kcell is unable to provide forward-looking commentary at present. Our profit and cash flow estimates remain largely intact (we cut our FY20 adjusted EPS by 9.5% to reflect higher interest charges), but the forecast revenue mix changes. Our reduction to consumer service revenues is largely offset by higher handset and core business sales. Loss of bulk SMS affects our headline sales estimates but not profits (see Exhibit 2).

Valuation: Relative resilience continues

Most telecom service providers are up ytd and are outperforming broader markets. At US$6.25, Kcell’s share price implies an FY22e EV/EBIT multiple of 12.9x, a premium to its historical rating and its nearest peers. However, Q2 results highlight the resilience of its quasi-utility revenue stream to economic uncertainty. We believe this resilience plus the scope for healthy profit and cash flow growth driven by synergies within the enlarged KT group, justify a premium rating.

Contrasting trends in Q2

Q2 saw a fairly large impact from COVID-19 on Kcell’s core consumer business. Growth in consumer service revenue, which had accelerated to 5.9% y-o-y in Q1, driven by the adoption of premium packages (see Resilience and consolidation benefits expected), fell to -4.2%. A shortfall in lucrative international roaming revenues, delays to topping up, slower migration to premium bundles and modest falls in usage (as more customers were stuck at home) all affected revenue. Just how much of this slowdown reflected lockdown measures (and therefore may improve when restrictions ease) and how much reflected pressure on consumer spending (which may not improve and may even get worse) is not clear. Customer numbers fell sequentially and 9.4% y-o-y, but growth in data traffic usage per subscriber accelerated to 53.6% y-o-y.

The shortfall in consumer revenue was largely offset by a much better than feared performance elsewhere. Handset revenue, which we had anticipated turning negative in the remainder of FY20 due to store shutdowns, saw growth actually accelerate to 62% y-o-y. The combination of a pivot to the online sales channel and the launch of iPhone SE saw sales up sequentially. The performance of core business sales – up 20% y-o-y – was also surprisingly robust. The decision to exit the low/negative margin off-net bulk SMS business affected headline revenue numbers but had no impact on profits. Stripping out off-net bulk SMS, y-o-y revenue growth in Kcell’s ‘core’ business would have been 4.8% (see Exhibit 1).

The combination of falling sales and marketing expenses ensured that EBITDA was broadly flat year-on-year, while a fall in depreciation charges saw underlying operating profit up 7.9% y-o-y. This was largely mitigated by an increase in the tax rate, but underlying EPS of KZT23.6 was still up 2%. Tight control of working capital and capex resulted in Kcell posting FCF of KZT11.4bn (a margin of 29.6%).

Exhibit 1: Financial performance in Q2 (y-o-y) by customer

KZTbn

Q2

Change

2019

2020

Absolute

%

Revenue

Consumer

29.7

28.5

(1.2)

(4.2)

Business

3.5

4.2

0.7

20.2

Core service revenue

33.2

32.6

(0.5)

(1.6)

Handset

3.7

6.0

2.3

62.0

Core revenue

36.9

38.6

1.8

4.8

Off-net bulk SMS

1.0

0.0

(1.0)

(98.6)

Total

37.9

38.6

0.8

2.0

Adjusted EBITDA

16.1

16.2

0.1

0.7

Margin (%)

43.6

42.0

Adjusted EBIT

8.1

8.8

0.6

7.9

Margin (%)

22.0

22.7

EPS (KZT/share)

23.1

23.6

0.5

2.1

CFFO (Cashflow From Operations)

1.1

15.5

14.4

1,313.7

Capex

(3.4)

(4.0)

(0.7)

20.1

FCF

(2.3)

11.4

13.7

N/M

Margin (%)

(6.0)

29.6

Source: Kcell


Changing mix, but long-term forecasts remain largely intact

With Kazakhstan imposing a second round of lockdown restrictions in July, near-term visibility remains low and Kcell is understandably reluctant to provide forward-looking commentary at present. Consistent with management comments on the Q2 results call, we assume that these current restrictions are less severe than those seen in Q2, but still expect a squeeze on consumer budgets to result in y-o-y declines in consumer revenues in H2. We cut our FY20 consumer service revenues by 12.6% and now expect a 6.9% fall y-o-y. However, this is largely offset by a 27.8% and 69% increase to our business and handset forecasts, respectively. Our core revenue forecast falls by 1.1%. Our underlying EPS forecast falls by 9.5% to KZT97.6 to reflect a slightly higher interest cost assumption.

Longer term, we continue to see significant scope to monetise growth in mobile data in a consolidated market. We assume consumer revenues return to growth in FY21, albeit at a slightly lower rate (4.2%) and from a lower base. Again, the cut to our numbers here is largely compensated by higher handset and business revenues. While we expect much of the iPhone SE-related growth seen in Q2 to slow in H220, management believes Kcell has achieved sustainable share gains in the online market.

Key to driving longer-term profit and cash flow growth is the combination of falling depreciation and the potential for synergies within the wider group. Both of these stories remain intact after Q2. The fall in depreciation accelerated to 5.6% y-o-y in Q2 and depreciation remains substantially ahead of capex. The company confirmed its commitment to drive cost synergies (‘the strategy is focused on ensuring Kcell maintains market leadership…whilst driving the monetisation of data and exploiting synergies across the entire Kazakhtelecom Group’). Quantifying the scale of the potential is not easy but in Resilience and consolidation benefits expected, we highlighted that network maintenance costs were 5% of sales, and in May Kcell announced a trilateral network sharing agreement with other Kazakh mobile operators. We see potential for further savings beyond those in our forecast. Our adjusted EPS estimates for both FY21 and FY22 change by less than 3%, while modest cuts to our capex forecast preserve our FCF forecast (see Exhibit 2).

Exhibit 2: Changes to forecasts

KZTbn

FY20e

FY21e

FY22e

Old

New

%

Old

New

%

Old

New

%

Revenue

Consumer

126.7

110.7

(12.6)

133.7

115.3

(13.7)

138.0

122.9

(10.9)

Business

13.5

17.3

27.8

15.2

19.9

30.6

19.1

22.9

19.9

Core service revenue

140.2

128.0

(8.7)

148.9

135.3

(9.2)

157.1

145.8

(7.2)

Handset

15.3

25.8

68.8

16.8

24.5

45.7

16.8

24.7

47.2

Core revenue

155.5

153.8

(1.1)

165.7

159.8

(3.6)

173.9

170.5

(1.9)

Off-net bulk SMS

4.0

1.4

(66.1)

4.0

-

(100.0)

4.0

-

(100.0)

Total

159.5

155.1

(2.7)

169.7

159.8

(5.9)

177.9

170.5

(4.1)

Adjusted EBITDA

66.4

64.8

(2.4)

69.9

68.4

(2.2)

72.8

71.9

(1.2)

Margin (%)

41.6

41.8

41.2

42.8

40.9

42.2

Adjusted EBIT

36.7

35.3

(3.3)

42.4

40.9

(3.6)

46.3

44.9

(3.0)

Margin (%)

23.0

22.7

25.0

25.6

26.0

26.3

EPS (KZT/share)

107.9

97.6

(9.5)

123.8

121.3

(2.1)

138.2

136.3

(1.4)

CFFO

58.3

52.6

(9.7)

56.5

56.1

(0.7)

60.2

59.4

(1.4)

Capex

(24.8)

(19.8)

(23.8)

(22.4)

(24.9)

(23.9)

FCF

33.5

32.9

(1.9)

32.8

33.8

3.1

35.3

35.5

0.6

Margin (%)

21.0

21.2

19.3

21.1

19.9

20.8

Source: Kcell, Edison Investment Research

Exhibit 3: Financial summary

KZTbn

2017

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

147.5

149.7

156.7

155.1

159.8

170.5

Cost of Sales

(67.0)

(72.8)

(79.2)

(78.6)

(79.9)

(85.6)

Gross Profit

80.5

76.9

77.4

76.5

79.9

84.9

EBITDA

 

 

57.6

50.9

63.5

64.8

68.4

71.9

Operating Profit (before amort. and except).

 

34.5

24.5

33.4

35.3

40.9

44.9

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(2.7)

(3.4)

(10.4)

(0.2)

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

31.8

21.1

23.0

35.1

40.9

44.9

Net Interest

(9.4)

(8.9)

(10.1)

(9.1)

(10.6)

(10.0)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.1

(0.1)

0.5

0.0

0.0

Profit Before Tax (norm)

 

 

25.1

15.6

23.3

26.2

30.3

34.9

Profit Before Tax (reported)

 

 

22.4

12.3

12.9

26.6

30.3

34.9

Reported tax

(8.6)

(3.7)

(2.8)

(6.6)

(6.1)

(7.7)

Profit After Tax (norm)

16.5

11.8

20.6

19.5

24.3

27.3

Profit After Tax (reported)

13.8

8.5

10.1

19.9

24.3

27.3

Minority interests

0

0

0

0

0

0

Discontinued operations

0

0

0

0

0

0

Net income (normalised)

16.5

11.8

20.6

19.5

24.3

27.3

Net income (reported)

13.8

8.5

10.1

19.9

24.3

27.3

Average Number of Shares Outstanding (m)

200

200

200

200

200

200

EPS – basic normalised (KZT)

 

 

82

59

103

98

121

136

EPS – diluted normalised (KZT)

 

 

69

43

51

100

121

136

EPS – basic reported (KZT)

 

 

69

43

51

100

121

136

Dividend per share (KZT)

58

59

30

45

123

127

Revenue growth (%)

4.6

(1.0)

3.0

6.8

Gross Margin (%)

54.6

51.4

49.4

49.3

50.0

49.8

EBITDA Margin (%)

39.1

34.0

40.6

41.8

42.8

42.2

Normalised Operating Margin

23.4

16.2

21.3

22.7

25.6

26.3

BALANCE SHEET

Fixed Assets

 

 

138.6

132.7

147.1

128.6

123.4

120.3

Intangible Assets

43.1

40.1

38.8

33.2

31.9

31.1

Tangible Assets

93.7

88.4

82.3

70.8

66.9

64.6

Investments & other

1.9

4.2

26.0

24.6

24.6

24.6

Current Assets

 

 

42.3

34.4

44.2

85.0

56.9

68.9

Stocks

3.4

4.7

6.6

7.5

7.2

7.2

Debtors

26.2

23.6

23.8

18.8

20.6

22.4

Cash & cash equivalents

12.7

6.0

8.8

36.1

6.6

16.8

Other

0.0

0.0

5.0

22.5

22.5

22.5

Current Liabilities

 

 

(87.2)

(81.2)

(39.4)

(38.0)

(18.9)

(19.7)

Creditors

(28.8)

(29.4)

(21.2)

(11.2)

(11.4)

(12.2)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(58.4)

(51.8)

(6.4)

(23.3)

(4.0)

(4.0)

Other

0.0

0.0

(11.8)

(3.5)

(3.5)

(3.5)

Long Term Liabilities

 

 

(18.0)

(17.8)

(80.4)

(102.0)

(88.3)

(94.5)

Long term borrowings

(12.0)

(14.9)

(55.5)

(70.0)

(70.0)

(70.0)

Other long-term liabilities

(6.0)

(2.9)

(24.8)

(32.0)

(18.3)

(24.5)

Net Assets

 

 

75.6

68.1

71.6

73.5

73.1

75.0

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

75.6

68.1

71.6

73.5

73.1

75.0

CASH FLOW

Op Cash Flow before WC and tax

57.6

50.9

63.5

64.8

68.4

71.9

Working capital

(13.8)

(20.6)

(19.3)

(8.9)

(1.7)

(2.5)

Exceptional & other

12.3

10.9

0.8

19.1

12.1

15.4

Tax

(12.9)

(5.4)

(2.2)

(13.3)

(12.1)

(15.4)

Net operating cash flow

 

 

43.2

35.8

42.8

61.8

66.7

69.4

Capex

(22.6)

(19.3)

(18.2)

(19.8)

(22.4)

(23.9)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

Net interest

(9.7)

(8.3)

(9.4)

(9.1)

(10.6)

(10.0)

Equity financing

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

(11.7)

(11.7)

(6.0)

(9.0)

(24.7)

(25.3)

Other

0.0

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

(0.8)

(3.4)

9.3

23.9

9.1

10.2

Opening net debt/(cash)

 

 

56.9

57.8

60.7

53.1

29.2

20.1

FX

(0.0)

0.1

(0.1)

0.0

0.0

0.0

Other non-cash movements

(0.0)

0.3

(1.6)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

57.8

60.7

53.1

29.2

20.1

9.9

Source: Company data, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Kcell Joint Stock Company and prepared and issued by Edison, in consideration of a fee payable by Kcell Joint Stock Company. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Kcell Joint Stock Company and prepared and issued by Edison, in consideration of a fee payable by Kcell Joint Stock Company. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Kcell Joint Stock Company

View All

Latest from the TMT sector

View All TMT content

Research: TMT

Datatec — Benefiting from operating leverage

Datatec is a global IT services group that has successfully operated a buy-and-build model throughout its 34-year history. The group operates in over 50 countries and is a global partner to Cisco, which represents c 40% of group revenues. After a challenging past few years, having finally bedded down a group-wide SAP implementation, the streamlined business returned to profitability in FY19, with both its major divisions, Westcon and Logicalis, profitable in FY20. In its latest trading update, cost-cutting led to improved year-on-year EBITDA, despite a slight fall in year-on-year revenues. Supported by a weakening US dollar and positive operating leverage, if this trend continues it will demonstrate the resilience of the business.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free