Updates – Magyar Telecom, Walmart

Magyar Telecom

Magyar issued 2011 results some days ago. The stock reacted positively on this. Some analysts seem to have expected less. If one looks at the “Normalized” numbers and cash flowws, both, free cashflow and “underlying EBITDA” decreased slightly in HUF terms (2-3%). With inflation in Hungary at around 5%, we see a real shrinkage of 7%.

If we look back to the initial case, we are somewhere between case 1 and case 3 with a fair value range between 416 HUF and 717 HUF, the more optimistic cases seem to be rather unrealistic, especially concerning the new entrant into the Hungarian mobile market. At a current price of 600 HUF, I actuallay think that the stock might be more or less fairly priced.

If one wants to bet on the Hungarian Forinth or an improvemt in the politival risk, Hungarian Government bonds with a yield of 8-9% might be the easier bet.

So starting today, I will sell down the Magyar Telecom stake with the usual restricitions.


Walmart has missed expectations with its 2011 earning release. Although I don’t care about analyst expectations, it is also intersting to see that the stockprice didn’t manage to surpass a kind of 15 year trading range if one looks at the long term chart:

As this is a rather “low conviction” play from my side, Walmart will be one of the next stocks to go if I find better opportunities.


  • Regarding Magyar Telecom: With the stock selling above 2 Euro and an exchange rate of 291 HUF/EUR the stock is worth 587 HUF. With 50 HUF as dividends (maybe sometime again 70-74) this results in 8,5% REAL dividend yield (instead of the just nominal bond yields). That itself might not justify the currency risk relative to other utilities with similar yields in the EUR-zone, but since the Forint is undervalued by -50% in terms of purchase power parity (@291 even more than @265), and still given the potential fiscal (upside) “risk”, it seems still as a solid “hold position” to me, at least as a permanent dividend position.

    • Hi Winter,

      my problem is that Magyar Telecoms profit and cashflow is shrinking on a nominal basis, this means on a real basis they are shrinking even more.

      the competitive environment worsened additionally. So I do not think that they are able to increase the dividend with inflation.

      Sure, the end of the special tax might increase dividedns, but I am worried about the underlying fundamentals.


  • Do not forget that Walmart pays a dividend. And there will be a day in the future, when the stock breaks out… it is a great stock. Warren loves it…

    • well,i haven’t sold it yet. However I think online retail and new competitors (Aldi, interesting article in Manager Magazin) will make things harder.

      Also, expansion outside US will not be easy. almarts competitive advantage is and was local.

  • You are right. At the moment it is not a buy, nearly fair valued (don’t ask buffet). And it wasn’t definitly a buy back in 2000. Just mentioned it is not a sell because of the chart :).
    Following Katsenelson, to sell in sideway markets at fair value price level, will be a good guide. So as to dig deeper, is now Tesco a buy you sold recently?

  • Well to be precise: 2011 total earnings under US GAAP are lower than 2010 earnings in absolute terms.

    Looking into the rear mirror makes always sense in order to learn from the past. In 2000, Walmart was a super star high growth company with a P/E of 40-50. Now its a mature company with a P/E of 14.

    It was definitely not a good idea to buy Walmart in 2000. I am not sure if it is still a buy now.

  • Though the Walmart stock didn’t manage to surpass the “trading range”, Walmart’s earnings has been increased within this period.
    Is there a reason to look in to rear mirror while driving 90m/h?

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