Telecard Limited (TELE) conducted its corporate briefing session today to discuss latest financial result and business outlook. To recall, the company posted consolidated earnings of PKR 141Mn (EPS: PKR 0.47) in 3QFY21 as opposed to a loss of PKR 29Mn (LPS: PKR 0.10) in SPLY. This takes the total profitability during 9MFY21 to PKR 334Mn (EPS: PKR 1.11) vs. a loss of PKR 39Mn (LPS: PKR 0.13) in SPLY.Key takeaways from the session are summarized below:
Starting in 1992 as a payphone operator to becoming an all-rounder ICT services provider today, Telecard Limited has come a long way. The company essentially offers carrier services and integrated voice solutions, and has 100% ownership in its subsidiary, Supernet Limited. Supernet Limited further has four subsidiaries under its umbrella which include: Supernet E solutions, SuperSecure, SuperInfra, and Phoenix Global.
The turnaround in earnings during 9MFY21 was attributed to 1) improved performance of subsidiaries which contribute around 65% to the total revenue, 2) cost optimisation strategies, 3) lower finance cost ( ↓ 39% YoY), and 4) massive jump in other income (↑ 11.8x YoY) on account of exchange gain and one-off reversal in provision for liabilities.
Despite higher profitability, the company reported a decline of 7% YoY in top-line to PKR 2.9Bn during 9MFY21, owing to price and contract renewal negotiations which led to cost optimisation. As a result, gross margin have improved by 3ppts YoY to stand at 33% during the period.
As per the management, COVID-19 has created several opportunities for the company due to increased dependency of general public on e-commerce and digital payment services. The company expects strong growth in digital transaction segment due to large broadband customer base of over 100Mn subscribers in Pakistan. Additionally, 4G spectrum auction expected to happen in June along with upcoming 5G rollout will aid accelerated growth in ICT services as per the company’s officials.
Through its subsidiary SuperSecure, the company has signed a 5-year contract with a major bank for its endpoint security needs. TELE has also entered into an agreement with Vanrise Solutions to market the company’s business automation services. Both the contracts are expected to generate additional revenue for the company in coming months.
While discussing the future outlook, the management highlighted that the renewal of Digital Pakistan Policy 2018 and the development of Pakistan’s Cyber Security Policy will open new avenues for the company. With increased focus of SBP and PTA on cyber security needs, the company is expecting its subsidiary, SuperSecure, to showcase strong performance going forward.
The company also mentioned that they are planning to change the name of the company from Telecard Limited to a more appropriate name in order to reflect the changing nature of company’s services. It is also exploring the option for potential listing of its subsidiary, Supernet Limited.
Courtesy – BMA Capital Management Ltd.