Czech Equity Daily: 11/11/10: Telefonica O2, Unipetrol

...recover from morning losses and closed down 1.3%. Trading activity was considerably slower compared to Tuesday. Erste Bank (-2.3%, CZK 794.5) followed the declining banking sector, which was affected by profit-taking and worse-than-expected results of Natixis and Unicredit. The Chinese central bank made a further step towards tightening its monetary policy by ordering big banks to raise the minimum required reserves. News from China regarding lower commodity imports affected the mining sector. NWR weakened by 0.9% to CZK 217.5, not really moving out of the range where it has stayed for the past few months. A target price on CEZ's shares was cut by Citigroup (CZK 815) and BNP Paribas (CZK 840) and the stock fell by 1.4% to CZK 773.5. CME, positively affected by a weakening dollar, closed up CZK 414 (+0.5%). Ahead of its earnings results Telefonica fell to CZK 385 (-1.4%).    Telefonica O2 CR: Positive (Analyst: Milan Vanicek) Telefonica O2 CR reported its 3Q2010 results yesterday after market close. There was a big positive impact of impairment reversal in fixed telephony (at OIBDA level CZK +4.3bn or CZK 13.3/share). Excluding this one-off item the results were in line with expectations. Revenues of CZK 13.9bn (-7.8% y/y) were in line with projections. Other items were affected by the already mentioned one-off gain, therefore significantly beating expectations. Net income reached CZK 6bn (+90%) vs. expected CZK 2.6bn. We regard the figures alone as neutral because they were in line with projections. However, the booking of the one-off item increases the potential of dividend, which was expected to be gradually lowered. A gross dividend for 2010 was estimated at CZK 36/share (9.4% gross dividend yield). Based on the new development there is potential for a dividend of CZK 47/share for 2010 (12.3% gross dividend yield). We expect distribution over a longer period and therefore we assume that the gross dividend for the next two periods will stay at last-year level of CZK 40/share (10.4% gross dividend yield). We consider the news positive and expect a positive reaction.   cons. CZK m 3Q2010 y/y eAFT eMarket Sales 13,853 -7.8% 13,914 13,970 Impairment reversal majetku 4,340 n.m. 0 - OIBDA (EBITDA) 10,401 53.4% 6,009 6,012 OIBDA margin 75.2% 30.0pps 43.2% - EBIT 7,523 88.2% 3,229 3,233 Net income 6,013 89.5% 2,599 2,599 EPS (p.a.) 74.7 89.5% 32.3 - Source: Telefonica O2 CR and ATLANTIK FT   Unipetrol: Neutral (Analyst: Bohumil Trampota) According to shadow minister of finance Jan Mladek, the Social Democrats are in favour of VV's proposal for lowering an excise tax on diesel by CZK 2.5/litre. This increases the chance of the proposal being pushed through despite the opposition from the finance ministry and the remaining two coalition partners (ODS, TOP 09). The proposal aims at attracting big transporters to fill up in the CR instead of abroad, which would be a positive factor for Unipetrol's revenues in the retail segment (Benzina). For now we consider the news neutral for Unipetrol since it is only a political issue for now.   ed_101111