Telelink Business Services Group: Initiation of Coverage

Telelink business services group share offering looking to provide investors a dividend yielding growth story. Shareholders of Telelink Business Services Group (TBSG) are planning to offer up to 30% of their shares on the market in two tranches – Jan’2020 7% (850,000 shares), with additional 7% upon interest, and the remaining, up to a total of 30% in Sept’2020. The offer price per share will be BGN 7.60 for the January tranche and 8.5x TTM EBITDA less net debt, but not less than BGN 7.60 for the second tranche. The group intends to distribute as dividends 50% of net profit, starting with BGN 4m this year (4% dividend yield). Valuation is highly dependent on the assumptions that (1) TBSG is able to bank on the 5G investments telecoms have to make – especially maintaining the relationship after the Vivacom ownership transition and (2) TBSG will be able to leverage the managed services business they have with Lufthansa to other Western corporates. Our “Buy” rating for the stock is based on the intrinsic value of the stock, expectation of tightly held initial ownership structure (little price volatility/liquidity) and the fair chances of benefiting on the high cash generation potential through dividends.