4iG — Record FY23 results; transformation plan underway

4iG (BSE: 4IG)

Last close As at 19/04/2024

HUF815.00

6.00 (0.74%)

Market capitalisation

HUF243,747m

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Research: TMT

4iG — Record FY23 results; transformation plan underway

4iG’s FY23 results showed good revenue and EBITDA growth on a reported and pro forma basis. The Telco business, which includes an 11 month contribution from the Vodafone Hungary acquisition, showed pro forma revenue growth of 7% and pro forma EBITDA growth of 17%. The group transformation project is well underway and, as part of the plan, the space-related businesses have been hived off into a standalone company. The plans for a subsea fibre-optic cable between Egypt and Albania are making good progress.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

4iG

Record FY23 results; transformation plan underway

FY23 results

Telecoms

4 March 2024

Price

HUF845

Market cap

HUF249bn

Net debt (HUFbn) at end FY23

867.1

Shares in issue

294.5m

Free float

14.0%

Code

4iG

Primary exchange

Budapest

Secondary exchange

N/A

Share price performance

Business description

4iG is a regional ICT/telecoms group, based in Hungary and focused on two core areas: telecoms and infrastructure in Hungary and the West Balkans; and IT services, where it is the number one IT systems integrator in Hungary.

Analyst

Katherine Thompson

+44 (0)20 3077 5700

4iG is a research client of Edison Investment Research Limited

4iG’s FY23 results showed good revenue and EBITDA growth on a reported and pro forma basis. The Telco business, which includes an 11month contribution from the Vodafone Hungary acquisition, showed pro forma revenue growth of 7% and pro forma EBITDA growth of 17%. The group transformation project is well underway and, as part of the plan, the space-related businesses have been hived off into a standalone company. The plans for a subsea fibre-optic cable between Egypt and Albania are making good progress.

Year

end

Revenue
(HUFbn)

PBT
(HUFbn)

EPS
(HUF)

DPS*
(HUF)

P/E
(x)

Yield
(%)

12/20

57.3

4.2

37.7

22.5

22.4

2.7

12/21

93.7

8.1

67.9

29.0

12.3

3.4

12/22

277.4

(15.2)

(67.5)

0.0

N/A

N/A

12/23

594.4

(24.6)

(108.9)

N/A

N/A

N/A

Note: *Dividend usually announced at AGM, which this year is on 29 April.

4iG reported FY23 results that showed pro forma revenue growth of 5.9% (Telco +7.2%, IT +3.1%), pro forma EBITDA growth of 22.6% and a pro forma EBITDA margin of 32.6%. Adding back one-offs that included HUF13.0bn for the telecoms windfall tax, HUF8.8bn in purchase pricerecor allocation (PPA) costs and removing a net credit of HUF20.3bn relating to acquisitions (HUF24.8bn gain on sale of MIS Omega, M&A costs HUF2.8bn and restructuring costs HUF1.7bn), normalised pro forma EBITDA was HUF204.1bn for FY23 (32.9% margin). The company reported a loss after tax of HUF32.0bn; adding back PPA costs, adjusted profit after tax was HUF6.5bn. The company closed FY23 with net debt of HUF867bn and gearing of 4.25x (based on pro forma normalised EBITDA), which should reduce further as the company executes its plans to monetise its telecom infrastructure.

4iG confirmed that it is making good progress with its transformation programme, due for completion by mid-2025. As part of that process, it has moved its space-related businesses into a separate entity, 4iG Space and Technology. This includes the group’s investments in space, satellite and drone technology, its defence industry digitalisation services and will also include the planned 45% stake in Remred (the acquisition is currently under negotiation). Remred is a Hungarian space engineering company specialising in the design, manufacturing, assembly, integration and testing of small space equipment and sub-systems, and works closely with leading space agencies such as ESA, NASA, JAXA and DLR.

In October 2023, 4iG signed a memorandum of understanding (MoU) with Telecom Egypt for the construction of a high-capacity submarine fibre-optic cable between Albania and Egypt. The cable will run on an open access model with multiple branching units and forward onward connectivity to major internet points of presence in Europe such as Frankfurt. The project will create a new European subsea cable entry point with a new Mediterranean transit route and should help 4iG to gain a share of data traffic between Europe/Asia and Europe/East Africa. In February, 4iG signed a non-binding term sheet with Telecom Egypt for implementation of the submarine data cable project and concluded an MoU with the Albanian government for the construction of the cable link between Egypt and Albania.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by 4iG and prepared and issued by Edison, in consideration of a fee payable by 4iG. Edison Investment Research standard fees are £60,000 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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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