February 11, 2014

GLO posts 13% hike in 2013 core net income; declares 1st half cash dividend

In a disclosure, Globe Telecom (GLO) said its 2013 core income after tax rose 13% YoY to P11.6b. This is slightly ahead of the P11.45b consensus forecast. Growth could have been higher if not for the higher staff costs and subsidy related to aggressive subscriber acquisition, and some softness in revenues in what should have been a strong quarter due to the impact of calamities that hit the country.

At any rate, growth was steady (vs the 9M13 average) for EBITDA and revenues although higher costs in 4Q13 brought the full-year EBITDA margin to 40% (35% in 4Q13) from 42% in 9M13. Meanwhile, Globe declared a cash dividend of P37.50/sh for the first semester.
 
Our Take: The full-year core earnings growth indicated acceleration from the 9% growth registered in 9M13 despite higher costs and relatively tempered revenue growth in 4Q13. With EBITDA growth consistently kept at 4%, we reckon that there may have been a muted rise in other financial charges and tax expenses. Globe has yet to submit its audited financial statements.

If annualized, the first semester cash dividend will amount to P75/sh and lower than the P79.9/sh consensus forecast. We take note, however, that Globe has set a 2014 capex target of US$600m-650m (~P27b-P29.25b) and this falls within the P28.1b average market forecast and can potentially be slightly lower than the P29b full capex spend in 2013.

If we take into account Globe’s track record, actual capex usually ends up lower than budget as some components are rolled over onto the succeeding year. If this trend holds in 2014, there could be room for cash flows to support dividends and meet consensus forecast. – WealthSec