Mobile network operator Vodafone has a new and simplified strategy. It wants drive both the mobile data and business-to-business side and launch new mobile financial services, while also ditching non-core assets and focusing on growth regions, such as Africa and India.
Reflecting that, Vodafone sold its 3.2 per cent stake in China Mobile in September for £4.3bn and has announced the £3.1bn sale of its stake in Japanese banking group, SoftBank. Although a similar fate looks unlikely for its Verizon Mobile and SFR stakes. Vodafone's proportionate share of free cash flow from the two operations was around £5bn last year and management want to maximise the value of these non-controlled assets.
Meanwhile, organic revenue growth is being driven by such regions as Asia Pacific and the Middle East, where revenues grew 10.9 per cent in the period. The European business saw revenues fall 1.3 per cent. Still, Vodafone's £6.1bn adjusted operating profit was in line with analysts' estimates - that's before stripping out an £800m impairment charge at the Greek operation. And management has raised full-year operating profit guidance from £11.2bn-£12bn to £11.8bn-£12.2bn.
Evolution Securities expect full-year pre-tax profit of £10.7bn, giving EPS of 16p (£10.7bn and 16.1p in 2010).
|ORD PRICE:||178p||MARKET VALUE:||£93.3bn|
|DIVIDEND YIELD:||4.8%||PE RATIO:||8|
|NET ASSET VALUE:||173p*||NET DEBT:||34%|
|Half-year to 30 Sep||Turnover (£bn)||Pre-tax profit (£bn)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 17 Nov
Payment: 4 Feb
*Includes intangible assets of £73.8bn, or 141p per share
Vodafone's new strategy looks good, but the group is facing pressure in its developed markets. A forward PE of 11 isn't so cheap, either - although the dividend yield is attractive. Fairly priced.
Last IC View: Fairly priced, 163p, 22 September 2010