Stock buyback ahead of large investments

Bakai MadybaevFebruary 06, 2013

On January 25, Kazakhtelecom announced it might buy (and sell) its stock to bring its price in line with the fair value.

Apparently the market was expecting something of the sort. In the last six weeks the stock gained more than 30%. However, the press-release did not live up to the expectations. In it we see signs pointing to the lack of commitment and expect now a much smaller buyback than what the recent price gains implied.

According to the incomplete unaudited 2012 financial results the company earned T20bn of profit in 2012, up by 17% from T17bn in 2011 and 11% above the earlier stated projection. Kazakhtelecom has also provided CapEx projections for the next three years which came below our assumptions.

Since no details of the buyback were announced we do not include it into our base case scenario. After revising the 2012 profit figures and CapEx projections we upgrade our 12-month target prices for common and preferred shares to T18,850 and T14,965, respectively, and revise our recommendation to ‘Hold‘ for both instruments.

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