March 19th, 2021 | 07:10 CET
Deutsche Telekom, Upco International, Vantage Towers - Not to be missed: important lessons for successful investing!
Table of contents:
DEUTSCHE TELEKOM AG - Well...
When the heavyweight of the German telecommunications industry went public in November 1996, its ambitious goals were that the "people's share" should develop a stock culture in Germany. Almost 25 years have passed since then, and the conclusion in terms of share performance is sobering. Even among the masses, Germans are still far too conservative and tend to overestimate the stock market risks and underestimate the risks of other asset classes such as bonds or real estate. It would be desirable if interest in "the stock market," in the broadest sense, were to continue in the future after the dream profits of recent years have faded.
Telekom shareholders in the early days bought the shares for the equivalent of EUR 14.57 at the IPO and were able to enjoy good dividends in the years that followed. The beginning of April is payday again - EUR 0.60 will be paid out per share. At current share prices of just under EUR 17, the investor's return since the IPO has been limited primarily to the dividend. Whether this is the definition of a successful IPO may be doubted. By way of comparison, the Dax share price index, which does not include dividend payments, has almost tripled in the period since 1996, while the "people's share" has not even managed to increase by 20%. If you think that's bad, the chapter on "Timing" has a nice story in store for you. A good six months after the IPO, shares were issued at a price of EUR 39.50. The Neuer Markt's euphoric mood drove the share to an all-time high of around EUR 103 in March 2000, followed by a public offering (re-placement) at EUR 66.50 in the summer of 2000. Investors who bought shares at these times must continue to be brave.
But since the stock market is known to value the future, bygones be bygones. The past year was good for the Bonn-based Dax group with a corona-resistant business model. Sales increased by 25% to EUR 101 billion. Adjusted consolidated net income increased by 16% to EUR 5.7 billion. Analysts forecast an increase in sales of around 5% and an increase in profits of the same magnitude for the current financial year. Free cash flow is expected to increase by as much as 20%. All in all? In our opinion, there are several more attractive investments than the Deutsche Telekom share.
UPCO INTERNATIONAL INC - Waiting for the next acquisition
Starting from the telecommunication services business segment, Upco has built up the additional pillar of digital services since its foundation in 2014. The latter segment provided for rising share prices in recent months. With a proprietary blockchain-based solution for payment services, Upco plans to launch in Europe later this year. The secure and convenient solution will enable direct payments between individuals and between individuals and merchants.
Nevertheless, the core of the business is operating as a licensed global telecom carrier in the international VoIP (Voice over IP) wholesale business - primarily in niche markets. Recently, the Company informed that it has expanded its acquisition pipeline and is in an early due diligence phase with two companies up to the signed expression of interest stage. Upco is on the lookout for leading wholesale telecommunications companies in a lucrative niche market with revenue levels between USD 10 million and USD 50 million. The companies must have increased revenues and profitability over several years and have generated an operating profit (EBITDA) between USD 0.5 and 5 million.
2021 is, therefore, a significant financial year in Upco's corporate history. In our opinion, the most important milestone is the launch of payment services in Europe. This business is highly scalable. Nevertheless, technological implementation is not a foregone conclusion, and market penetration or achieving a critical market share is also a significant challenge. Of course, attractive acquisitions will also have a positive impact on the share. The Company currently has a market capitalization of only CAD 24 million. A revaluation is definitely on the cards in case of a successful entry into the payment services market.
VANTAGE TOWERS AG - Bargain
The radio tower division of the British telecommunications group Vodafone celebrated its debut on the Frankfurt Stock Exchange yesterday. The subscription price of EUR 24 was at the lower end of the book building range of EUR 22.50 to EUR 29. The first price yesterday was EUR 24.80. The share exited trading at EUR 25.25, and as a result, the Company is valued at EUR 12.8 billion. Vodafone will receive around EUR 2.3 billion from the IPO, which the Group intends to use to reduce its debt.
With around 82,000 macro locations in ten countries, Vantage Towers is a leading radio mast operator in Europe. The Company was founded in 2020 and is headquartered in Düsseldorf, Germany. Its portfolio includes towers, masts, rooftop sites, Distributed Antenna Systems (DAS), and small cells. The Company generates revenue by building, operating and leasing this passive infrastructure to Vodafone and other wireless network operators. Because of the predictable earnings, such business models are popular with institutional investors.
There is not yet much on the valuation of the stock from analysts. But a rough comparison with Spanish competitor Cellnex makes Vantage Towers' stock look cheap. Cellnex has just over half the sites in its portfolio yet has a market capitalization that is about 70% higher. Investors should therefore add a few shares of the stock market newcomer to their portfolio.
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