The telecom sector's future looks promising with wireless network adoption, infrastructure investments, and ongoing innovations. It's crucial for on-demand connectivity, supporting seamless communication and digital transformation. The industry thrives on expanding 5G networks, the digital economy's growth, and increased smartphone and smart electronics usage.
Considering these factors, it could be wise to buy quality telecom stocks Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (TLK), Millicom International Cellular S.A. (TIGO), and Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (MYTAY) poised for bullish run.
Telecom companies emphasize security, cloud technology, AI, and collaboration tools to meet diverse connectivity needs, boosting their positive outlook. Additionally, enterprises in sectors like healthcare, manufacturing, and retail are adopting private wireless networks for premium connectivity solutions. The global telecommunication market is projected to grow at a CAGR of 6.2%, reaching $3.10 trillion by 2030.
In this digital era, services like OTT, messaging, and e-commerce demand fast connectivity. Advancements in 5G technology have improved network speed, capacity, and reliability, boosting sector growth. Companies are also exploring "5.5G," a faster version of 5G. The GSM Association projects that 5G networks will have over 1.10 billion subscribers globally by 2025.
On top of it, AI is transforming the telecom sector by streamlining network management, automating customer service, enhancing predictive maintenance, and improving cost savings and cybersecurity. Its use in the global telecommunication market is forecasted to hit $21.20 billion by 2030, growing at a 40.4% CAGR.
Considering these conducive trends, let’s analyze the fundamentals of the three stocks from the Telecom – Foreign industry, beginning with the third choice.
Stock #3: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (TLK)
Headquartered in Bandung, Indonesia, TLK provides information and communications technology and telecommunications network services worldwide. The company operates through mobile, consumer, enterprise, Wholesale and International Business, and Other segments.
In terms of the trailing-12-month Return on Common Equity, TLK’s 17.34% is 456.1% higher than the 3.12% industry average. Its 8.35% trailing-12-month Return on Total Assets is 604.9% higher than the 1.18% industry average. Likewise, the stock’s 12.75% trailing-12-month Return on Total Capital is 258.3% higher than the 3.56% industry average.
TLK’s revenues for the three months ended March 31, 2024, increased 3.7% year-over-year to Rp37.43 trillion ($2.30 billion). The company’s profit for the period and profit per ADS stood at Rp7.82 trillion ($480.78 million) and Rp61.10, respectively.
Additionally, as of March 31, 2024, TLK’s total current assets amounted to Rp58.78 trillion ($3.61 billion) compared to Rp55.61 trillion ($3.42 billion) as of December 31, 2023.
Analysts expect TLK’s revenue for the quarter ending September 30, 2024, to increase marginally year-over-year to $2.39 billion. Its EPS for fiscal 2024 is expected to grow 1.6% year-over-year to $1.72. Over the past month, TLK’s stock has declined 4% to close the last trading session at $18.70.
TLK’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Stability, and Quality. Within the A-rated Telecom - Foreign industry, it is ranked #8 out of 45 stocks. To see TLK’s Growth, Value, Momentum, and Sentiment ratings, click here.
Stock #2: Millicom International Cellular S.A. (TIGO)
Headquartered in Luxembourg, TIGO provides cable and mobile services in Latin America. It offers mobile services, including mobile data and voice, as well as short message services; along with mobile financial services, such as payments, money transfers, international remittances, savings, real-time loans, and micro-insurance.
In terms of the trailing-12-month EBITDA margin, TIGO’s 35.13% is 89.1% higher than the 18.58% industry average. Its 12.41% trailing-12-month Capex / Sales is 232% higher than the 3.74% industry average. Likewise, the stock’s 15.97% trailing-12-month EBIT margin is 77.8% higher than the 8.98% industry average.
In the fourth quarter, which ended on March 31, 2024, TIGO’s revenue increased 8.6% year-over-year to $1.49 billion. It reported an operating profit of $324 million, up 70.6% from the year-ago value. The company’s net profit grew substantially from the year-ago quarter to $92 million. Also, its EBITDA grew 24.5% year-over-year to $632 million.
For the quarter ending June 30, 2024, TIGO’s revenue is expected to increase 5.9% year-over-year to $1.48 billion. Its EPS for fiscal 2024 is expected to increase considerably year-over-year to $1.92. Over the past nine months, the stock has gained 62.2% to close the last trading session at $25.22.
TIGO’s solid prospects are reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth, and Sentiment and a B for Stability, and Quality. It is ranked #2 in the same industry. Click here to see TIGO’s Value, and Momentum ratings.
Stock #1: Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (MYTAY)
Headquartered in Budapest, Hungary, MYTAY provides fixed-line and mobile telecommunication services for residential and business customers in Hungary, Bulgaria, Romania, and the Republic of North Macedonia. It operates through the MT-Hungary and North Macedonia segments.
In terms of the trailing-12-month Capex / Sales, MYTAY’s 11.29% is 202.1% higher than the 3.74% industry average. Its 0.60x trailing-12-month asset turnover ratio is 21.4% higher than the 0.50x industry average. Likewise, the stock’s 14% trailing-12-month Return on Common Equity is 349.2% higher than the 3.12% industry average.
For the fiscal first quarter that ended March 31, 2024, MYTAY’s revenue increased 14.5% year-over-year to HUF224.23 billion ($622.81 million). The company’s gross profit increased 18.7% year-over-year to HUF135.46 billion ($376.24 million).
For the same quarter, its operating profit grew 101.8% from the year-ago value to HUF49.34 billion ($137.05 million). Also, its adjusted profit attributable to owners of the parent came in at HUF38.05 billion ($105.70 million), up 213.7% over the prior-year quarter.
Street expects MYTAY’s fiscal 2025 revenue to increase 10% year-over-year to $2.61 billion. It surpassed the Street revenue estimates in three of the trailing four quarters. Over the past year, the stock has gained 130.4% to close the last trading session at $13.78.
It’s no surprise that MYTAY has an overall rating of A, which translates to a Strong Buy in our proprietary POWR Ratings system.
It has an A grade for Stability, and Sentiment and a B for Growth, Value, and Quality. It is ranked first in the Telecom – Foreign industry. Beyond what we stated above, we also have given MYTAY grades for Momentum. Get all the MYTAY ratings here.
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TLK shares were trading at $18.61 per share on Wednesday afternoon, up $0.12 (+0.65%). Year-to-date, TLK has declined -24.51%, versus a 12.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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