Proximus Earnings: Cutting Fair Value to EUR 9.20; Investor Confidence In Management Seems Low
While narrow-moat Proximus reported in-line second-quarter results, the announcement that they intend to acquire the 50% remaining stake from fiber network Fiberklaar was not well received by the market. We estimate Proximus is overpaying for this asset compared with similar fiber transactions, which has likely triggered the 9% selloff in shares. The consolidation of Fiberklaar will also result in increased capital expenditure in the medium term and net debt/EBITDA of 3.1 times, compared with 2.7 previously, which increases risks even more as we await the entrance of Digi in the Belgian market. We reduce our fair value estimate to EUR 9.20 per share from EUR 10.50 as we account for the acquisition, including the higher capital expenditure required in the medium term to support the network buildout.