Morningstar 28 APR 2023:
Narrow-moat Proximus first-quarter results were aligned with management's 2023 guidance, with underlying domestic revenue up 4.8% (guidance of 1% to 3% growth for the full year) and underlying domestic EBITDA down by 3.4% (guidance of a 3% decline). We are pleased with Proximus' performance on the revenue front, as it is being able to pass price increases to customers with little impact on churn rates. EBITDA pressures mainly come from wage indexation (Proximus has done several inflation wage adjustments in the past 12 months) and energy costs. We are maintaining our EUR 14 fair value estimate, with our 2023 forecast aligned with management guidance.
We believe Proximus' shares are overly punished, as the current price of EUR 8 per share assumes a permanent impairment in margins of almost 500 basis points, assuming flattish revenue. The company is facing near-term pressures from inflation and, more importantly, will see a fourth mobile operator enter the market (Digi) in Belgium, which will put pressure on prices, but Proximus is trading at 3.3 times enterprise value to 2023 EBITDA multiple, which looks cheap to us.