• Earnings, excluding one-offs, look encouraging… Earnings were distorted by one-off items including: i) cUSD22 million charge for restructuring costs and provisions in Bangladesh; ii) USD83 million impairment loss on assets; iii) reversal of tax provision for dividends related to the sale of the Djezzy stake; and iv) USD9 million FX gain. Excluding these one-off items, GTH would have booked net profit of around USD35 million, ahead of our net loss estimate of USD24 million.
• …but Algeria remains challenging While it is somewhat encouraging to see bottom-line performance improving, we were disappointed by the performance of the Algerian subsidiary. Djezzy’s revenue for the quarter fell 9% Q-o-Q to USD292 million, mostly on the back of ongoing aggressive price-based competition, as well as a 4% Q-o-Q depreciation in the Algerian Dinar versus the US Dollar. This, in our view, has led to its subscriber base remaining broadly unchanged from last quarter at c17 million, while ARPU in DZD weakened 2% Y-o-Y due to the churn of postpaid subscribers, which in turn is due to the ongoing impact of late launch of 3G services vis-à-vis competitors. Djezzy’s EBITDA margin for the quarter remained at a healthy 55.5%.
• Reiterate our view: Focus on 2016 Investors should discard the company’s performance in 2015 and focus on what we believe will be a better 2016, backed by: i) an impending refinancing of the shareholder loan at lower rates; ii) a restructuring programme that should yield results towards end-2016; and iii) a GTH-led merger with a competitor in Pakistan. As seen in Algeria’s 4Q2015 numbers, we note that short-term performance could be under pressure until the completion of the restructuring programme in 2H2016. We reiterate our Buy rating on GTH, as the stock is significantly undervalued at the current level, even if we take into consideration a bear case scenario.

Omar Maher
Karim Riad