On Friday, UBS adjusted the price target on Proximus stock, listed as PROX:BB on the Brussels Stock Exchange and OTC: BGAOY, to €4.80 from the previous €6.50. Despite this reduction, the firm's stance on the stock remains Neutral.
UBS noted that investor sentiment continues to lean negative after Proximus shares experienced a 10% decline following the launch of competitor Digi in the Belgian market. Over the past year, Proximus stock has seen a substantial 40% drop.
The UBS analyst pointed out that while some investors may have anticipated this downward adjustment, the majority are concerned about the sustainability of Proximus' dividend. There are doubts regarding the identification of positive catalysts for the stock. With the company's leverage exceeding its Capital Markets Day (CMD) target range of 2.5-3x and a near-term forecast of limited free cash flow (FCF) generation, the dividend appears to be at risk.
Despite these concerns, UBS anticipates that Proximus will sustain its €0.6 dividend per share (DPS) for the estimated fiscal year 2025. This expectation is based on the €194 million payout being supported by €236 million generated from asset sales. However, UBS suggests that the company may reassess its dividend policy in 2026.
Looking ahead, UBS identifies potential catalysts for Proximus, including the 2025 guidance to be issued with the fourth-quarter 2024 results. This guidance is expected to shed light on the company's projections regarding Digi's market impact. The first-quarter 2025 results will provide further clarity on the actual impact of Digi's entry.
Additionally, the anticipated regulatory approval for fibre cooperation in Flanders is seen as a potentially significant positive development, as it would transform the asset into one with high utilization levels, akin to infrastructure-type assets.
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