Background and overview of Blue Label Telecoms (BLU)
Blue label offers a variety of services, most largely based on electronic tokens. Think "pay as you go" airtime and data for cellphones, buying pre-paid electricity, ticketing solutions (via ticket pro). Blue label recently announced it possibly taking up a subscription to recapitalize Cell C. Which if succesfully concluded would see BLU own roughly 35% of Cell C.
Blu also ha exposure in India via Oxigen Services India, offering E-wallet services in the second most populist country in the world. This if managed successfully can be a very big money spinner for BLU in future, based solely on the large number of people in the country.
For more on Blue Label see http://www.bluelabeltelecoms.co.za/
Blu also ha exposure in India via Oxigen Services India, offering E-wallet services in the second most populist country in the world. This if managed successfully can be a very big money spinner for BLU in future, based solely on the large number of people in the country.
For more on Blue Label see http://www.bluelabeltelecoms.co.za/
Scroll over or click on the funnel chart to get more details of BLU's latest financial results
Financial review:
The net profit margin achieved by Blue Label Telecoms amounted to 2.85%, this is very similar margins to the South African retailers, where they have massive turnover and low net profit margins (see Shoprite, Pick 'n Pay, Massmart).
The pie chart below shows the contribution of Blue Label's operations to their revenue and pre-tax profit earnings.
It is clear from the pie charts above that the bulk of BLU's revenue and profit before taxes comes from their South African distribution division (this includes ticketpro, pre-paid airtime and data, pre-paid electricity etc). Margins in the mobile component seems very strong though, as it only contributes 1.14% of revenues but over 4% of pre-tax profits.
Earnings per share came in at 51.4c per share for the half year, placing BLU on a PE ratio of around 16.1, which given the low margins is a little strong. Looking at BLU's cash generated they generated R1.74 a share (or just over R1.2billion). BLU is clearly very cash generative and there is strong demand for their services (and with more and more houses using pre-paid electricity for example, demand for their services is set to continue to increase).
Blue Label Mexico is still loss making, but on a positive note, the size of the losses are reducing and management stated that they managed to cut expenditure by 5%. So it seems like there is a turnaround strategy that is starting to find traction. The losses in Mexico impacted BLU's overall performance. As a guide if BLU Mexico were to break even instead of losing BLU R32million, BLU's earnings would have been about 8.7% more.
Earnings per share came in at 51.4c per share for the half year, placing BLU on a PE ratio of around 16.1, which given the low margins is a little strong. Looking at BLU's cash generated they generated R1.74 a share (or just over R1.2billion). BLU is clearly very cash generative and there is strong demand for their services (and with more and more houses using pre-paid electricity for example, demand for their services is set to continue to increase).
Blue Label Mexico is still loss making, but on a positive note, the size of the losses are reducing and management stated that they managed to cut expenditure by 5%. So it seems like there is a turnaround strategy that is starting to find traction. The losses in Mexico impacted BLU's overall performance. As a guide if BLU Mexico were to break even instead of losing BLU R32million, BLU's earnings would have been about 8.7% more.
A few financial ratios to mull over for Blue Label Telecoms (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 0.86 (more than 2 shows high levels of financial leverage).
- Current Ratio: 1.63 (a measure of liquidity. Less than one signals possible trouble in paying off current liabilities)
- Quick Ratio: 1.26 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt).
- Return on Assets (ROA): 4.81%
- Return on Equity (ROE): 8.96%
- Net Profit Margin:2.85%
- Dividend Yield:1.89%
Valuation:
Based on its current financial statements and services provided by BLU we value them at between R23.72 and R24.05 We therefore feel that at it's current price BLU offers good value. With a possible significant stake in Cell C, a turnaround in Mexico, greater demand for services such as pre-paid electricity and a expanding business in India, we feel BLU is well placed for future growth.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
