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Summary of Broker’s Recommendation
| Stock Code | GLO |
| Company Name | Globe Telecom |
| Broker | AP Securities |
| Opinion Issued on | 17 Aug 2023 |
| Recommendation | Accumulate |
| 1-Year Target Price | PHP 2,150.00 |
We expect GLO to be able to grow within the limited space of the telco and connectivity sector, given its unique ability to unlock value from its non-telco business. Coupled with the company guidance that lower capex will result to positive free cash flow within the next two years, we are revising our recommendation on GLO from HOLD to ACCUMULATE based on consensus Target Price of P2,150 per share.
Analysis and Opinion
Normalized net income for the quarter is P4.87-Billion
Excluding the P8.5-Billion post-tax one-time gain from the partial sale of GLO’s data center business, as well as other non-recurring non-operating income, normalized net income for the first half stood at P10.0-Billion (-11% YoY).
Service revenues outpace competition
GLO booked P80.4-Billion in gross service revenues in 1H 2023, growing by 1.9% from the same period last year. In contrast, TEL grew its service revenues by 0.8% during the first half. GLO’s non-telco revenues reached P2.8-Billion in the first half and contributed 3.5% to GSR. The company’s other non-telco joint ventures, Mynt (Gcash) and Vega, grew by 40% QoQ and 63% YoY to contribute P972-Million (5.6%) to GLO’s pre-tax income. Despite impressive growth from Mynt, the company said during the analyst briefing that IPO plans for their fintech unit is still on hold for now.
Data drives mobile revenues
Data now accounts for a little more than 80% of GLO’s mobile revenues, and offset the 13% decline in voice and 10% decline in SMS to drive mobile revenues into positive territory. Mobile data also served as the primary driver in the 4% increase in ARPU in GLO’s mobile prepaid sub-segment. ARPU was also boosted by the end of the SIM card registration period, which trimmed GLO’s subscriber count by 38% to 53.7-Million. According to the company, this number represents 99% of its revenue generating customer base.
Company defends launch of prepaid fiber
In response to a question about the potential impact of the newly-launched prepaid fiber product on blended ARPUs, GLO CEO Ernest Cu said that prepaid could actually offer margins that are at par or better than existing postpaid plans. Cu cited lower acquisition costs, limited access to customer service, and no billing costs for prepaid. At the same time, upfront payment for installation costs means that there are less subsidized costs that needs to be amortized over the duration of the contract.
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