On Monday (8 February), Telkom published an update for the first 9 months (to end December 2020) of its current financial year (FY20). Judging by its share price rally over the past week or so (the share is up c. 27% from 2 February to 8 February’s close), we think there was significant expectation heading into this update, that Telkom was going to say something interesting about its progress on unlocking shareholder value (it has not previously published an update like this).
However, on the value unlock story, the company only said that “management remains firmly on course with the value unlock strategy having recently concluded a successful market sounding exercise to gauge interest on Gyro Masts and Towers. Unlocking value from our portfolio of businesses is a key component of our capital allocation framework and will afford management flexibility to rebase the balance sheet and reinvest in the business.” This is very much unchanged from Telkom’s comments when it announced its interim (1H20) results in November, so there was nothing new on this front. The lack of apparent progress since the release of its interim results was a little disappointing, although the strong rally in the share price, following the announcement, suggests the strong operational performance, relative to market expectation, was more than enough to offset this. On its progress with steps to unlock value, focus will now be on the next update which is likely to be when Telkom reports FY20 results on 24 May 2021.
On the operational side, we highlight the following:
As for the Group’s divisional performances, it looks like a continuation of past trends, although Telkom did note in the update that SA’s macro situation was slightly better in 3Q20. In terms of business segments, we highlight the following:
Considering that Telkom trades on an extremely undemanding rating of <4x EV/EBITDA, we think that this is a very solid operational result. However, given the time that has elapsed since management began talking about the potential to unlock value through possible corporate action, pressure is likely to build for Telkom to show more tangible progress in this regard.