United Media – Moving on.
All,
Please find our updated analysis here.
United Group (UM) has reduced leverage and pushed its maturities out. The SSNs are trading in line with the rest of the high-yield market, and the PIYC notes are in the high 90s. If there is further disruption in the high-yield market, we may look at UM again, but for now, we are putting the name on the shelf.
Positioning:
- We receive back our 3% NAV position in the PIYC 9% 2025. We are happy with the performance over six months annualised return was nearly 38%. The downside of renewed stress for the market or UG is 20 points, whereas the upside is three more points of capital gain.
- We see a par refinance in November 2024 as increasingly likely. Rather than a tender or amend and extend
- The geographic footprint of UG does give some EM flavour to the name, even if Serbia is the only major network outside the EU. UG has an interest rate challenge, but an additional 8% rise in revenue would cover an increase in coupons to an average of 10%, and UG has 5- years to achieve this.
- UM may come back into our universe again.
Trading Update 2Q23:
- LTM Revenue €2.7bn, Adjusted EBITDA €917m.
- Net Leverage at H123 was 5.1x, PF the sale of its towers business completed in August.
- UG raised prices to recover higher costs, and ARPU increased 6% in 1H. Despite the price rise, RGUs were up 2%. Management had expected to be able to get price rises through, and they were right. EBITDA margins were slightly higher, except for a minor fall in Serbia due to cost issues.
- In Greece, the hoped-for broadband price increases haven’t been approved by the government. Timing will slip into 2024. However, providers have committed to fibre roll-out, which will only be delivered, if pricing is allowed to rise. The 5% fall in Greek post-paid mobile ARPU was explained away as discounts to convert users from pre-paid. Given higher customer stickiness/margins in post-paid and the maturity of the Greek market, the move makes sense.
We are always happy to hear your views on this.
Aengus
T: +44 203 744 7055