Headquartered in Amsterdam, Netherlands, VEON Ltd. (VEON) is a global connectivity and internet services provider. Listed on the Nasdaq and Euronext stock exchanges, it is a leading multinational telecommunications company.
Last week, VEON won the Best Mobile Operator Service for Connected Consumers award for its MobileID service at the Global Mobile Awards 2022. VEON CEO Kaan Terzioğlu said, “The Global Mobile Awards is one of the most prestigious honors in telecoms and this recognition showcases the work we are doing across the industry and with our partners to ensure customer data is secure and kept by licensed, regulated and locally based service providers. MobileID is an important step in that direction, and we will be working actively to expand its use through operator adoption and interoperability agreements.”
Shares of VEON have declined 76.6% in price year-to-date and 23.5% over the past five days to close Friday’s trading session at $0.40. This can be attributed to bearish market sentiment due to the ongoing Russia-Ukraine war and heightened market volatility.
Here is what could shape VEON’s performance in the near term:
Robust Liquidity
As of Feb. 27, VEON had $2.10 billion in cash and deposits. This includes bank account deposits, money market funds, and on-demand deposits across several international banks across the European Union, Japan, and the United States. Also, the company has a $1.25 billion revolving credit facility, out of which it has utilized $430 million to repay its senior notes, due March 1, 2022. VEON has other debt maturities at its holding company level in the current year. Its revolving credit facility matures in March 2025.
Regarding this, VEON CFO Serkan Okandan said, “The USD 1.5 billion HQ cash and deposit balance and USD 0.8 billion undrawn credit line under the RCF will allow us to maintain a prudent liquidity position in these times of macroeconomic uncertainty.”
Impressive Financials
VEON’s total revenues increased 6.8% year-over-year to $7.79 billion in its fiscal year 2021, ended Dec. 31, 2021. This can be attributed to a 5.3% improvement in total service revenues and a 14.3% rise in mobile data revenues. Its EBITDA came in at $3.33 billion, up 5.7% from the same period last year. Its net income improved 354.3% from its year-ago value to $801 million, while equity-free cash flow rose 38% from the same period in the previous year to $421 million.
VEON’s total mobile customers stood at 203.60 million as of Dec. 31, 2021, up 4.4% year-over-year. Also, the company’s total 4G subscribers rose 29.9% year-over-year to 97.30 million.
Discounted Valuation
In terms of non-GAAP forward P/E, VEON is currently trading at 1.66x, which is 89.1% lower than the 15.23x industry average. In addition, its forward Price/Sales and Price/Cash Flow multiples of 0.09 and 0.25, respectively, are significantly lower than 1.44 and 9.34 industry averages.
VEON’s 0.62 forward Price/Book ratio is 75.6% lower than the 2.52 industry average, while its 2.46 forward EV/EBITDA multiple is 72.4% lower than the 8.89 industry average. Furthermore, VEON’s 1.08 forward EV/Sales ratio compares with the 2.21 industry average of 2.21.
POWR Ratings Reflect Rosy Prospects
VEON has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
VEON has a grade of A for Value and a B for Quality and Growth. The stock’s lower-than-industry valuation metrics justify the Value grade. In addition, VEON’s 62.71% trailing-12-month ROE is 663.3% lower than the 8.22% industry average, which is in sync with the Quality grade. Also, the company’s net income has risen at a 5% CAGR over the past three years, in sync with the Growth grade.
Among the 48 stocks in the A-rated Telecom – Foreign industry, VEON is ranked #10.
Beyond what I have stated above, view VEON ratings for Sentiment, Stability, and Momentum here.
Bottom Line
VEON is one of the leading telecom providers globally. The company is well-positioned to benefit from the increased demand for connectivity and internet services amid the remote lifestyle and the global 5G rollout. In addition, as central banks around the world prepare to raise benchmark interest rates, various telecom companies might be adversely impacted by rising borrowing costs. However, VEON’s impressive liquidity backing is expected to hedge this risk to a degree. Thus, we think VEON could be a valuable addition to one’s portfolio now.
How Does VEON Ltd. (VEON) Stack Up Against its Peers?
VEON has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Telecom – Foreign industry with A (Strong Buy) ratings: Telekom Austria AG (TKAGY), Bezeq The Israel Telecommunication Corporation Limited (BZQIY), and Internet Initiative Japan Inc. (IIJIY).
VEON shares were trading at $0.53 per share on Monday morning, up $0.13 (+33.73%). Year-to-date, VEON has declined -69.01%, versus a -9.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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