Sunday, May 23, 2010
Building stock in wirelss carriers America Movil and Turkcell Iletisim
As the market continued to raise doubts regarding the EU's bailout program of Greece the past few weeks, on Friday US Labor Department reported jobless claims rising 25,000 to 471,000. This was the first rise in the past 5 weeks and reinforced that the US recovery would be slow.
This weakness has brought down two companies that I have been following for some time. The first company is America Movil (AMX). The company's valuation finally was brought down to a level where I felt comfortable initiating a small position. The company has been busy of late, launching offers for Telmex International and Carso Global Telecom in what would be CEO Carlos Slim's mega consolidation bringing wireless and land line business under one roof. The company sports a P/E of 12.7 (ttm), profit margin of 19.3%, and Return on Assets of 16.7% (somewhat efficient)
The second company is Turkcell Iletisim (TKC), a company that has been a member of the portfolio since July of 2008. Increasing competition has really put the pressure on the company, and Greece's problems aren't helping with the possible wave of economic struggle across Europe in the years ahead. The company recently released first quarter results with revenues growing 6.9% compared to the same period a year ago. What hurt the company was the 25% drop in Net Income for the same period. The company sports a P/E of 27, and profit margin of 16.9%. I decided to add to my position as I still believe this company is poised for growth over the long haul. In the most recent quarter, you can start to see some of the results from the company's continued investments in building out its 3G network. CEO Süreyya Ciliv reported, "At the same time, thanks to our superior 3G offering in Turkey, our data revenues grew by 69.6% to TRY 92.1 million, leading to an increase in the share of mobile data and services revenues in Turkcell Turkey's revenues by 2.7 pp to 19%". The one concern I do have is the recent decision to reduce maximum prices Apr.1.2010 by Turkey's Telecommunication Authority. The company has a track record of strong management which should help them navigate these waters. Still keeping an eye out for these developments going into the 2nd and 3rd quarter.
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