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Wednesday, Morgan Stanley (NYSE:MS) began coverage on Millicom International Cellular SA (NASDAQ:TIGO) shares, assigning an Equalweight rating and setting a price target of $32.00. The company has demonstrated remarkable performance with a 66.63% return over the past year, according to InvestingPro data. The firm based its position on the stock’s performance and potential drivers for momentum in the second half of 2025.
Millicom’s stock valuation remains modest, despite a significant rally of approximately 40% in the previous year when measured in US dollars. The company boasts a perfect Piotroski Score of 9 and maintains a "GREAT" overall financial health rating, as reported by InvestingPro. This trend is not unusual for telecommunications companies in Latin America. Morgan Stanley identifies two key factors that could propel Millicom’s stock forward in the latter half of 2025. The first is the completion of a $975 million tower transaction expected by mid-2025. The second is the potential market consolidation in Colombia, anticipated by the end of 2025.
In Colombia, Millicom reported revenues of $1.4 billion in 2024, with a normalized EBITDA margin around 40%. This performance is notably strong compared to some of its competitors who have larger operations but much lower EBITDA margins, approximately 24% for the first nine months of 2024. Morgan Stanley suggests that successful market consolidation in Colombia could offer Millicom three advantages: a market repair narrative, significant potential for synergies, and a reduced weighted average cost of capital (WACC). Specifically, the consolidation could lessen Millicom’s exposure to higher capital costs in markets like Bolivia.
Morgan Stanley maintains its Equalweight stance on Millicom’s Swedish listing, with a target of SEK 340 per share, while initiating the US listing with a target of $32 per share. The firm’s outlook is based on the company’s financial performance and strategic moves within the telecommunications sector in Latin America, particularly focusing on the potential benefits of the Colombian market consolidation for Millicom.
In other recent news, Millicom International Cellular S.A. announced robust growth for the third quarter of 2024, with equity free cash flow nearly doubling to $271 million. The company also saw a modest rise in service revenue, reaching $1.34 billion, and EBITDA grew by 9.8% to $585 million. Millicom attributed this success to strategic transactions and restructuring efforts.
Additionally, Millicom’s Board of Directors recently revealed a new shareholder remuneration policy, which includes the resumption of regular cash dividends. The company plans to sustain or grow cash dividends annually, maintaining a prudent capital structure.
In line with this, Millicom plans to pay an additional interim dividend of $0.75 per share in April 2025, following the release of its fourth-quarter 2024 results. Furthermore, the Board intends to propose a dividend of $3.00 per share at the Annual General Meeting scheduled for May 21, 2025.
These developments reflect Millicom’s confidence in its financial stability and commitment to providing shareholder value, as well as its strategic focus on enhancing network capacity and customer experience.
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