May 17, 2015

Globe Telecom posts 25% hike in 1Q15 core net income

Globe Telecom (GLO) yesterday announced 1Q15 net income of P4.2b, up 43% YoY. However, if we take out the impact of additional depreciation pertaining to network modernization last year, core net income would have been at P4.18b which still reflects a strong 25% YoY growth.

This earnings growth came on a 13% rise in service revenues to P26.22b as a result of broad-based expansion across revenue sources, particularly the broadband (+31% YoY) and fixed line data (+17% YoY). Notwithstanding the continued dip in international long distance revenues, mobile revenues and fixed line voice managed to grow by a creditable 10% and 12%, respectively.

GLO's mobile subscriber base expanded 13% to 46.1m while broadband subscribers grew 41% to 3.09m. Also noteworthy was the 400bp YoY and 600bp QoQ increases in EBITDA margin to 42% owing to the 25% increase in EBITDA.

Meanwhile, the company also declared an interim cash dividend of P20.75/sh to shareholders on record as of 26 May and will be payable on 11 Jun. If annualized, this will amount to P83/sh for the year which is higher than our P80/sh estimate.

Our take: Globe continues to sustain a strong growth momentum with the 1Q15 core net income accounting for 27% of our full-year estimate and 28% of the full-year consensus forecast. This comes amid the market share gains by the company against PLDT and better cost management which resulted in higher EBITDA margins.

It remains to be seen, however, if the earnings momentum will be sustained throughout the year because Globe tends to book adjustments in costs as well as higher marketing and subsidy expenses in 4Q14. At any rate, the results came better than expected. We will be reviewing our numbers pending more details from the investors' briefing today. – WealthSec