We expect full year capex intensity for CY14 to be significantly lower vs. CY13, which should translate to a higher dividend payout. DIAL paid a full year dividend of Rs. 0.29 per share for CY13 (translating to a 45% payout), despite a negative FCF of Rs. 8.4bn.
While DIAL trades at a significant premium to the market on a P/E valuation basis, we prefer to value the stock on an EV/EBITDA multiple given the capital intensive nature of the business. At its current price of Rs. 13.00, the stock trades at a CY14E P/E multiple of 18.2x and a relatively attractive EV/EBITDA multiple of 6.4x.
Sorce
John Keells Stock Brokers (Pvt) Ltd.