November 13, 2014

GLO posts 22% YoY in 9M14 core income

Globe Telecom (GLO) yesterday announced 9M14 net income of P10.53b, almost triple the level in 9M13. However, netting out the impact of accelerated depreciation as well as net forex and mark-to-market gains, core net income was at P11.58b, up 22% YoY. This was driven mainly by sustained growth service revenues (+8% YoY) which, in turn, was fueled by the 16% growth in both mobile and fixed line broadband and data revenues.

Operating expenses and subsidy grew by 10% as higher staff costs, marketing and promotional expenses, and professional services fees were tempered by lower operating taxes, interconnection costs and re-contracting fees. This enabled overall EBITDA to rise 5% to P29.76b although EBITDA margin slightly fell to 41% in 9M14 from 42% in 9M13. We also note, however, the slight sequential rise of GLO’s EBITDA margin to 43% in 3Q14 alone from 42% in 2Q14.

GLO also declared a cash dividend of P18.75/sh for the fourth quarter, bringing the total to P56.25 and on track to meet our full-year DPS estimate of P75 which translates to a 4.6% yield based on the last closing price.

Our take: Globe results came ahead of expectations, with the reported net income accounting for 76% of our full-year estimate while core net income represented 82% of our full-year estimate (and 88% of market consensus). The results were also better than PLDT’s interim results in terms of revenue, EBITDA and core net income growth.

While we see room for possible upward revisions to the consensus forecast, we are inclined to keep our numbers in anticipation of higher subsidy and subscriber acquisition costs in 4Q14 with the launch of the iPhone 6 and other new smartphone models. This also comes amid intensifying competition in the mobile service segment where the industry has resumed aggressive promotional offers on the basic service tariffs. We will come up with a longer note shortly pending more details from the company’s investors briefing today. – WealthSec