Headquartered in Luxembourg, Millicom International Cellular S.A. (TIGO) provides cable and mobile services in Latin America and Africa. The company offers mobile services, including mobile data and voice; short message service; and mobile financial services, such as payments, money transfers, international remittances, savings, real-time loans, and micro-insurance. The stock has gained 17.1% over the past month to close its last trading session at $15.55.
The company achieved service revenue growth in every country and business unit in the second quarter of fiscal 2022. It expects to achieve full-year 2022 organic OCF growth of around 10% and cumulative EFCF of between $800 million and $1 billion over the next three years.
Moreover, Colombia performed pretty well, as service revenue growth accelerated to more than 8%, driven by mobile, which grew nearly 20%, fueled by high-single-digit ARPU growth resulting from the shift in mix toward postpaid.
Here is what could influence TIGO’s performance:
Latest Developments
Last month, TIGO announced that its operation in Colombia has entered into a wholesale network access agreement with Empresa de Telecomunicaciones de Bogota (ETB). According to the terms of the agreement, Tigo Colombia will be able to offer Tigo-branded broadband internet, PayTV, telephony, and over-the-top services to residential and small business customers using ETB’s fiber-to-the-home (FTTH) network, which covers 1.5 million homes in Bogota.
Also, last month, TIGO announced that its operation in Colombia (Tigo Colombia) has entered into a wholesale network access agreement with Ufinet. The terms of the agreement enable Tigo Colombia to offer Tigo-branded broadband internet, PayTV, telephony, and over-the-top services to residential and business customers using Ufinet’s extensive fiber-to-the-home (FTTH) network in Bogota.
Robust Financials
TIGO’s revenue increased 44.6% year-over-year to $1.45 billion for the second quarter of fiscal 2022. Its operating profit grew 99.6% from its year-ago value to $247.00 million, while its net profit came in at $129.00 million compared to a net loss of $100.00 million in the prior period. The company’s EPS amounted to $1.14 compared to a loss per share of $0.77 in the year-ago period.
Strong Profitability
TIGO’s trailing-12-month gross profit margin of 72.52% is 43.5% higher than the industry average of 50.52%. In addition, its trailing-12-month net income margin of 14.62% is 173.9% higher than the 5.34% industry average. Also, its trailing-12-month ROE, ROC, and ROA are 281.2%, 38.5%, and 134.6% higher than the respective industry averages.
Discounted Valuation
The stock’s 15.37X forward non-GAAP P/E is 14.3% lower than its industry average of 17.94x. Also, its trailing-12-month EV/Sales of 1.73X is 20.1% lower than its industry average of 2.16x. Its 0.47x forward Price/Sales is 65.9% lower than its industry average of 1.38x
Impressive Growth Prospects
Street expects TIGO revenues to rise 49.9% in the current quarter, 31.1% in the current year, and 3.6% next year. The company’s EPS is expected to rise 420% in the current quarter and 24.2% next year.
Furthermore, the company has an impressive earnings surprise history; it topped the consensus EPS estimates in three of the trailing four quarters.
POWR Ratings Reflect Solid Prospects
TIGO has an overall A grade, which equates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. TIGO has a B grade for Quality, Value, and Stability. TIGO's higher-than-industry profitability is consistent with its Quality grade. The company’s lower-than-industry valuation justifies its Value grade. Its 0.91 beta is in sync with its Stability grade.
Among the 47 stocks in the A-rated Telecom – Foreign industry, TIGO is ranked #5.
Beyond what I stated above, we have graded TIGO for Growth, Sentiment, and Momentum. Get all TIGO ratings here.
Bottom Line
TIGO’s strong financials reflect the stock’s bright prospects. Being part of a defensive industry, the stock’s lower-than-industry valuation and strong profitability make it a solid buy for investors looking for steady returns.
How does Millicom International Cellular S.A. (TIGO) Stack Up Against its Peers?
TIGO has an overall POWR Rating of A, which equates to a Strong Buy. Check out these other stocks within the Telecom – Foreign industry with A ratings: Telekom Austria AG (TKAGY), MTN Group Limited (MTNOY), and Internet Initiative Japan Inc. (IIJIY).
TIGO shares were trading at $15.76 per share on Thursday morning, up $0.21 (+1.35%). Year-to-date, TIGO has declined -44.60%, versus a -9.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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