We are pleased to announce the release of an Investor Report on Sonatel Group (Senegal), written by the Banque Regionale de Marchés (Dakar) in partnership with AfricaNext Investment Research.  This assessment of one of the leading telecom assets in West Africa aims to provide investors and operators with a unique inisght over Sonatel’s performance and valuation perspectives.:

A sustained revenue performance despite slower overall growth. We firmly believe in Sonatel’s unique positioning: its superior network coverage (to almost every single village in Sénégal and Mali), strong distribution network, strong brand name – Orange – and solid management team strengthen the investment case. With an attractive ROE of 33% at YE2009, profitability is still very high with a 56% EBITDA margin (56% at year-end 2008) while growth opportunities remain for the Sonatel. Earnings per share (EPS) rose 20% to top FCFA 16 000 in 2009, allowing for high dividend payment in line with the Company’s traditionally high dividend payout.

Attractively low trading multiples. Despite shedding about 31 % over the past 24 months, we are cautiously optimistic on the Group’s 2010 outlook. At 31 December 2009, Sonatel traded at 4.0x EV/EBITDA 2009A, with a P/E multiple of 7.3x. In terms of relative value and when compared to peer firms in the sector, these multiples suggest that the stock is undervalued. Today Sonatel trades at 4.4x EV/EBITDA, a 27% discount to peer company valuation and a 46% discount to Maroc Télécom on the same basis.

External opportunities are nowhere near faltering. Beyond internal opportunities in the markets in which the Group operates, external opportunities abound. The Group’s total population under coverage is around 37.2 million with an average penetration of 24.7% at YE2009, a level weighted down by Guinee Conakry and Guinee Bissau. Given the low penetration levels in the region, we remain confident in Sonatel’s ability to identify opportunities and capture growth through product innovation and differentiation.

We set our target price at 170 140 Fcfa using DCF valuation, relative valuation and a dividend discount model. We believe Sonatel’s stock price (currently trading at FCFA 135 000) is good value at current levels and when compared to peer companies in the sector and region (Maroc Telecom).

Priced at $500, this 25-page report is available for purchase on our site (www.africanext.com). For more information, please contact info@africanext.com