Investor VEON offers to hold Kyivstar IPO

21.04.2023 0 By NS.Writer

Over the past two years, the investment company Shah Capital Management bought 4,95% of the shares of VEON, which, among other things, owns the Ukrainian operator Kyivstar. On April 14, the head of the fund sent a letter to the managers of VEON, where he prescribed a number of steps to increase the price of the company's shares by 5 times. Editorial office of AIN.UA got acquainted with the letter and recounts the main facts from it.

Illustrative photo

According to the management of Shah Capital Management, they were surprised that VEON shares are at such a low level - about $19 apiece. A number of steps proposed by the fund should raise the value of the company's shares to $100 per unit.

Start buyback of shares for $200 million.
In the future, the company must also use a minimum of 50% of its free cash flow to repurchase shares by a certain point. In particular, the fund believes that VEON's EV/EBITDA multiplier is 1,8X, while its competitors (Vodacom, MTN, Bharti, Millicom, America Movil are listed) are 6X, and therefore this indicator should become an example for VEON.
VEON has accumulated $2022 billion in VEON by the end of 2,5. According to Shah Capital Management, this is too much: the free funds in the accounts should not exceed $200 million. It is proposed to use the funds to cover loans and buy bonds, calculated until 2024.
To reduce costs, the company also proposes to reduce the number of members of the board of directors from the current 11 people to 7-8.
VEON is to spin off its fintech and entertainment businesses (JazzCash, Mobilink, Tamasha and Toffee) into a separate business unit and prepare it for an IPO in Dubai.

Kyivstar - for IPO

One of the proposals concerns the Ukrainian company "Kyivstar". According to the management of Shah Capital Management, VEON has to consider two scenarios regarding the future fate of the company.

Sell part of the company to another player.
Bring Kyivstar to the stock exchange separately from VEON in order to fully realize the company's potential. Among other things, it is suggested to consider the options of the Warsaw Stock Exchange or NASDAQ.

"Kyivstar" is truly one of the largest companies in Ukraine. The turnover for 2022 amounted to UAH 31 billion, which at the current exchange rate is slightly more than $800 million. The main income is telecom, but the company is developing separate services. For example, it acquired the medical project Helsi and increased the base of its TV products to an audience of 1,1 million consumers every month.

VEON's annual report notes that overall the company's numbers are up across the board, and that the downtrend is due to a full-scale invasion, not bad management or anything like that.

Sale "Vympelcom"

Shah Capital Management proposes to implement all the actions described above immediately after the sale of VEON's main Russian asset, Vymplekom. The deal is expected to be closed by June 1, 2023, its value is estimated at $2,2 billion (at the same time, VEON's capitalization is $1,4 billion, which is what the Shah Fund is talking about — the holding is greatly undervalued). It is expected that the deal will be successful and VEON will be able to get rid of criticism due to the continuation of its activities in the Russian Federation, and free resources to be directed to popularization of the holding and improvement of financial indicators.

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