WAY TOO EX­PEN­SIVE

Finweek English Edition - - Companies & Markets - BELINDA AN­DER­SON

SPE­CIALISED RE­TAILER CEL­COM, which vends air­time, owns Vo­da­com re­tail fran­chise stores and is slowly di­ver­si­fy­ing up Africa, listed on the AltX on 22 Septem­ber 2006 and raised cap­i­tal in a pri­vate place­ment at 100c/share.

It cur­rently trades at 34c/share, with re­cently re­ported head­line earn­ings per share to June – re­stated for SAICA Cir­cu­lar 08/07, which in­cludes the amor­ti­sa­tion of in­tan­gi­bles – of 138c, putting it on a his­toric mul­ti­ple of 24,6 times. Pre­vi­ously re­ported HEPS for the 15 months to June 2007 were 4,58c.

Off the new base Cel­com’s HEPS grew at 18%, or 25% on an an­nu­alised ba­sis. Rev­enues jumped 46% to just more than R1bn. But its al­ready pa­per-thin earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion (EBITDA) mar­gins of 1,78% last year shrunk to 1,24% this year.

OP­POR­TU­NI­TIES

• • • A play on the past few years of growth left in the SA mo­bile mar­ket, on­go­ing hand­set re­place­ments plus growth in Africa as it rolls out this pres­ence. Its Uganda ac­qui­si­tion should con­trib­ute pos­i­tively next year. With cell­phone op­er­a­tors want­ing to own more of the cus­tomer Cel­com could be a small nib­ble for a big­ger op­er­a­tor at the right price.

RISKS

Lo­cal mar­ket mat­u­ra­tion. African ac­qui­si­tions are al­ways risky. Cited poor global eco­nomic con­di­tions and chal­leng­ing SA trad­ing con­di­tions as re­quir­ing con­ser­va­tive group bud­gets this year. Ad­mits it needs to im­prove cost man­age­ment, op­er­a­tional ef­fi­cien­cies and per­for­mance lev­els.

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