Citi Comments On Millicom International Cellular Following Solid Earnings

Millicom International Cellular's MICC higher guidance, FCF margin to "high teens" implies c.5% consensus upgrades. The company will buy back additional $500m in stock during 2011. Fundamentally, Citi notes the acceleration in Central America growth and the improving African trends as positive. The decision to de-list from the US NASDAQ may lead to some forced selling in the short term, given that volumes in Stockholm have been round 1/3 of the US average in 2011. The lack of country disclosure makes detailed analysis impossible. Q111 EPS at $2.17 was above Citi's $1.52 estimate driven by the stronger operations. Capex at $137m was below Citi's $153m estimate and drove net debt lower than Citi's forecast at $1,060m. Mobile group additions totaled 1,174k, flat YoY, above consensus at +1.0m. Surprisingly, ARPU in US$ terms also outperformed in all regions. Strong results that should drive c.5% consensus EPS upgrades. But, Citi reiterates its Hold and $100 target price on African competitive risks in 2011 and absent further forecast upgrades sees valuation as high in a global context. MICC closed Monday at $94.92