After a weak start in 1Q21 related to COVID-19, Silknet returned to growth from 2Q21. The company generated GEL 306.4mn (+8.3% y/y) in revenue and GEL 168.3mn (+7.3% y/y) in adjusted EBITDA over 9M21, translating into solid adjusted EBITDA margin standing at 54.9% (-50bps y/y, due to increased electricity tariffs and higher salary costs). Strong economic rebound and the partial recovery in tourism supported the company’s growth, with mobile data being a key driver for a strong performance (average mobile data traffic per user stood at c. 8GB in Sep-21, up 63% y/y). Silknet considerably improved its net profitability performance in 9M21, posting GEL 31.6mn net income (translating into 10.3% net income margin) after GEL 78.2mn net loss in 9M20 (with net income margin at -27.7%). Notably, GEL’s appreciation reduced the company’s leverage, down from 2.8x as of Jun-21 to 2.7x by Sep-21. Silknet issued a new USD 300mn Eurobond in January 2022, with coupon rate set at 8.375% (262.5bps lower than the previous one and 676.5bps spread over the benchmark UST due Dec-26). With this transaction, the Eurobond is the only debt in the company’s capital structure. High FX exposure remains a significant risk for Silknet, as the company considers revoking existing cross-currency hedge, which will result in 100% open position.
Macro Analysis /Georgia
Silknet FY Update - Mobile Data Driven Recovery
Senior Analyst - Fixed income, Transportation, Telecommunications, Construction @ Galt & Taggart