Daily analyst comments
MTS upgrades 2009 capex forecast by 20%
20.10.09 10:03
MTS’s decision to raise its capex forecast looks fairly rational, and we do not see any reason for investors to worry. In addition, thanks to the strengthening of the operator’s main reporting currency, the Russian ruble, its USD-denominated value is showing a steady upward trend.
On 19 September 2009, media reported that MTS had upgraded its capital expenditure forecast for the current year from USD 1.5 billion to USD 1.8 billion. The main reasons for the operator’s move, according to media, were the strengthening of the Russian national currency and the devaluation of the Uzbekistani som. The latter factor caused MTS to invest more than 30% of overall capex in its Uzbek subsidiary in 2Q 2009. According to company management, the funds necessary for these investments came from accounts denominated in the national currency.
In general, the scheduled 20% rise in capital expenditures does not cause us any serious worries: the reasoning is quite justifiable and, as a result, the event is unlikely to have any huge impact on MTS cash flow or DCF valuation. Moreover, the situation on the FX market, i.e. the ruble strengthening, should positively affect the operator’s current USD-denominated value.
Our rating for MTS (RTS: MTSS) is BUY with an end-of-year 2011 target of USD 11.71 per share.