July 15, 2024 10:05 GMT
Elisa Q2 Preview; Stable Profile Though Dividend Policy Limits Upside Potential
COMMUNICATIONS
Rating: Baa2/BBB+
- Elisa report Q2 results tomorrow; BBG consensus is looking for rev +0.8%, EBITDA +3.9%, FCF -11%. Q1 results in mid-April were broadly in line; revenue was -1% YoY though this was largely due to disposals with service revenue +6% YoY while EBITDA was +4% YoY.
- Equity has slightly underperformed SXKP since then at +6% vs. +10%; spreads have performed well though (EUR 29s ~20bps tighter vs. ~6bps tighter for €IG). Elisa’s curve offers decent rolldown compared to Scandi peers for quite a stable profile though liquidity is poor with only three EUR 300mn lines in play.
- Elisa was affirmed by Moody’s in Sept where they noted solid credit metrics with gross debt/EBITDA at 1.8x (against thresholds of well below 2x and above 2.5x) and RCF/gross debt ratio at 21% (against thresholds of above 30% and trending towards 20%) though they were marked negatively on their generous dividend policy.
- Headline metrics have all been stable in recent periods. Elisa’s reported leverage sits at 1.7x (vs. 1.5-2x target) with an equity ratio of 43.8% (vs. >35% target). Historically disciplined CapEx, a consistent dividend policy (albeit high at 80-100% of prior year net profit which often means just under half of EBITDA) and a lack of meaningful strategic changes expected under the new CEO support a stable cash-flow outlook though also limit any potential ratings momentum.
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