Why has the stock dropped?
Proximus had to invest heavily in the deployment of Fiber. This made the company cut the divided two times in the last 5 years dropping it from 1.5 Eur to 0.6 Eur.
Aside from the fiber investment, Proximus also acquired a majority stake in Route Mobile, increased stake in BICS (and Telesign) to 100%, invested in 5G deployment as well as bought Fiberklaar. All those investments lead to the dividend reduction.
Proximus was traditionally a dividend generating company. This is why many people who were holding Proximus for its dividend sold it.
The introduction of a fourth telecom provider (Digi) also had an impact on the stock price that appeared to be an overreaction as Digi didn't perform as well as expected and aside from that, currently leases its infrastructure from Proximus anyway (which wasn't included in the news sources that announced the arrival of Digi).
Future prospects
Proximus is currently (25/01/2025) trading at a forward PE ration of 4.2. The earnings and cashflow rate of the company is expected to grow by analysts as well as the company itself. Company and analysts forecasts estimate that by 2028 its cashflow will double allowing an increase of its dividend to ~90c per share. What is currently calculated in the forecasts of the analysts is the introduction of a fourth telecom provider (Digi). Based on current information that is not yet incorporated in the forecasts, Digi isn't doing that well and has disappointed many clients that tried to switch.
Current valuation
Although Proximus holds some intangible assets in its books, the current P/B of 0.41 indicates by far an undervaluation of the company. The same applies for its P/E of 4.2. The company will (based on all forecasts) increase to its pre-covid profitability and cash-flow levels although this will happen in the coming 3-5 years. In the meantime you can enjoy a 0.6 Eur dividend which translates to a yield of 12.5%.
Price target
Based on current information and with revenue growth (which is expected to increase because of international activities) and profit margin remaining stable, if the company regains its historical P/E of 15, the stock price should increase to 14-16 euros by 2030.
If you take the after-tax divided into account and the potential stock price increase, the expected gain is around 300-330% which is way above the average SP500 expected gains.
How well do narratives help inform your perspective?
