Weakness in the Hungarian economy and increased competition in Serbia and Montenegro continue to depress revenues at Magyar Telekom. While margins are being supported by cost-cutting measures, the stock's free cash flow yield has now fallen below the required 12.7% hurdle rate we use for Hungary. We therefore sold the stock.
Half-owned by Deutsche Telekom, Magyar is Hungary's dominant fixed line and mobile operator. Whilst in a mature market, this is compensated for by a high 8% yield; there will be further modest earnings growth domestically, and stronger numbers from its operations in Montenegro and Macedonia, where it is also the leader. Further out, a re-rating seems likely when Hungary joins the Eurozone.
| Sedol |
Type |
Price |
Date |
| 4577469 |
Sell |
HUF 730.97 |
23/06/2008 |
| 4577469 |
Buy |
HUF 908.38 |
21/08/2007 | |
