Belgacom (BCOM.BR): Still looks
unattractive relative to the sector
Company Name: Belgacom Ticker: BCOM.BRPrice:
23.385 52-Week Price Range (EUR): 31-22
Year Net EPS . . Gross
To Income Diluted Dividend P/E Yield
December EUR EUR EUR X .
2007 1,004.00 3.01 2.18 7.77 9.32
2008 886.00 2.72 2.18 8.61 9.32
2009E 762.61 2.28 2.18 10.27 9.32
2010E 744.85 2.25 2.18 10.39 9.32
2011E 747.54 2.27 2.20 10.29 9.41
Price Performance (absolute): 1m: -14% 3m: -17% 12m: -24%
Price Performance (relative): 1m: -2% 3m: -1% 12m: +22%
Stock Rating: S
What's changed
Belgacom reported in-line 2008 results on March 6, however, guidance for 2009 was
slightly weak vs. company-gathered consensus expectations.
Implications
We believe Belgacom’s stock will revert to peer multiples and maintain our Sell rating.
Although the stock is perceived as a ‘super’ defensive in a defensive sector we view it as
expensive given the anemic growth outlook and choice of other high quality defensive
stocks in the sector.
Valuation
We are making very minor adjustments to revenue forecasts. However, we cut EBITDA
by approximately 1% in 2009E and 2010E and 0.6% in 2011E, driven mostly by
downgrades within the Enterprise business unit. Increased interest charges off higher net
debt also contribute to net income downgrades of 4.5%, 4.2% and 3.7% in 2009E-11E.
However, a higher share count due to our reduced buyback expectations amplifies the
EPS downgrades to 9.5%, 11.8% and 14.1% for 2009E-11E respectively. Our new
12-month DCF-based price target is €24.60 (previously €25.90). Belgacom is trading on a
premium to the sector on 5.4x 2009E EV/EBITDA vs. sector average of 4.5x.
Key risks
Upside risks to our price target include a more stable pricing environment and greater
cash returns; downside risks include government overhang, greater regulatory-induced
price deflation and possible acquisitions.
The Goldman Sachs Group Inc. does and seeks to do business with companies covered in
its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment
decision.
March 13, 2009 Analyst Comment
2 Goldman Sachs Global Investment Research