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Sector: Technology Media and Telecommunications
Tencent
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain O/P on Tencent post its decent 4Q24 results, with accelerating topline growth and higher EBITDA margin; FOCF contracted due to a one-off surge in capex for GPUs, but debt metrics remained stable and modest. We expect Tencent’s topline growth to remain steady at a high single percentage in FY25, thanks to its advertising, domestic/international gaming, fintech and cloud segments; we expect EBITDA margin to edge higher to 43% on a favorable revenue mix; we expect FOCF to expand and debt metrics to further improve. We continue viewing Tencent as a core holding in China and Asia IG credits, and we like its 2030/2031/2041 in particular.
Business Description
AS OF 29 Apr 2025- Founded in November 1998, Tencent is a leading provider of Internet value added services in China. Since its establishment, Tencent has ventured into instant messaging, social networking, online payments, digital entertainment, and PC and smartphone gaming. Most recently, it has also forayed into high-tech areas such as artificial intelligence, and cloud computing.
- Tencent's leading Internet platforms in China include Weixin/WeChat (online messaging), QQ Instant Messenger (online messaging), Tencent Games (gaming), Tencent Video/Weixin Video Accounts (video platforms), WeChat Pay (payments), and Tencent Cloud. The combined monthly average users (MAU) of Weixin and Wechat reached 1.38 bn as of 30 Sep 2024.
- In 4Q24, 46% of revenues came from Value Added Services (which consist of Domestic Games, International Games, and Social Networks), 33% came from FinTech and Business Services (e.g. commercial payments and cloud), 19% from Online Advertising and 2% from Others.
- Tencent is currently primarily listed on the Hong Kong Stock Exchange, with a market capitalization of HKD 4.4 tn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025While Chinese regulators have adopted a more friendly stance towards tech companies, any regulatory clampdowns abroad and domestically (e.g. antitrust rules, data security, personal information protection laws) may affect Tencent’s business. Tencent’s gaming, music streaming, and online payment units are among those that have come under regulatory scrutiny in the past.
Tencent uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers, which poses regulatory risks. Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.
Key Metric
AS OF 29 Apr 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 25.2% | 27.0% | 31.4% | 29.8% | 25.4% |
| Net Debt to Book Cap | 4.0% | 6.0% | 8.5% | 1.0% | 2.3% |
| Debt/Total Equity | 33.7% | 36.9% | 45.9% | 42.5% | 34.0% |
| Debt/Total Assets | 19.7% | 20.1% | 22.8% | 23.5% | 20.1% |
| Gross Leverage | 1.4x | 1.7x | 1.9x | 1.6x | 1.3x |
| Net Leverage | 0.2x | 0.4x | 0.5x | 0.1x | 0.1x |
| Interest Coverage | 24.8x | 24.7x | 19.0x | 19.9x | 22.5x |
| EBITDA Margin | 38.3% | 34.9% | 34.3% | 38.9% | 42.4% |
CreditSight View Comment
AS OF 20 Mar 2025We maintain O/P on Tencent post its decent 4Q24 results, with accelerating topline growth and higher EBITDA margin; FOCF contracted due to a one-off surge in capex for GPUs, but debt metrics remained stable and modest. We expect Tencent’s topline growth to remain steady at a high single percentage in FY25, thanks to its advertising, domestic/international gaming, fintech and cloud segments; we expect EBITDA margin to edge higher to 43% on a favorable revenue mix; we expect FOCF to expand and debt metrics to further improve. We continue viewing Tencent as a core holding in China and Asia IG credits. We like its 2030/2031 for 10-15 bp of spread pick up against China A SOEs. We prefer Tencent over Baidu/JD, which are rated 1-3 notches lower but trade only marginally wider.
Recommendation Reviewed: March 20, 2025
Recommendation Changed: August 18, 2022
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Woori Financial Group
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Search topics about wealth insights and investments.Alibaba
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain our Outperform recommendation on Alibaba post its decent F3Q25 results; topline growth were ahead of expectations thanks to improving monetization of domestic eCommerce and cloud demand accelerated; though, wider losses for international eCommerce weighed on EBITDA margin, and higher capex for cloud/AI led to a fall in FOCF; debt metrics remained modest and net cash expanded. We expect Alibaba’s topline growth (excl. Sun Art and Intime) to accelerate over F4Q25 and FY26; we expect EBITDA margin to stay flat, but FOCF to trend lower on a material increase in capex for cloud; we expect Total debt/EBITDA to remain stable, and Alibaba to maintain its healthy net cash position. We view the credit as a core holding in China and Asia IG; we like its 2030/2031/2035/2041 in particular.
Business Description
AS OF 29 Apr 2025- Founded in 1999, Alibaba is the largest retail commerce company in the world based on gross merchandise volume (GMV) as of 31 March 2023.
- The company's business segments comprise Taobao & Tmall Group (44% of F3Q25 revenue; China e-commerce incl. Taobao, Tmall, Taobao Deals, Taocaicai, 1688.com), International Digital Commerce (12%; incl. Lazada, AliExpress, Trendyol and Daraz), Cloud Intelligence Group (11%; incl. AliCloud, AI), logistic provider Cainiao (9%), Local Consumer Services (5%; incl. Ele.me, Amap), and Digital Media and Entertainment (2%, incl. Youku & Alibaba Pictures) and Others (17%; incl. Freshippo, Fliggy, Alibaba Health, Intelligent Information Platform, SunArt, DingTalk).
- Taobao/Tmall is Alibaba's core business and the main EBITA & cash generation unit of the group. Alibaba's annual active consumer exceeded 1 bn in June-2022.
- Alibaba had a market capitalization of RMB 2.1 tn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025While Chinese policymakers have adopted an increasingly friendly stance towards tech platforms, regulatory clampdown (e.g. anti-monopoly guidelines, data security laws, personal information protection laws) may still affect Alibaba as it increases compliance cost. There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Intensifying competition amongst eCommerce platforms may result in slower topline growth and weaker EBITDA margins.
Alibaba does not control Alipay but relies on Alipay to conduct substantially all the payment processing and escrow services on its marketplaces.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.
Key Metric
AS OF 29 Apr 2025| CNY BN | FY21 | FY22 | FY23 | FY24 | LTM F3Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 12.1% | 11.6% | 12.6% | 13.3% | 17.5% |
| Debt/Total Equity | 13.8% | 13.1% | 14.4% | 15.3% | 21.1% |
| Debt/Total Assets | 8.8% | 8.3% | 9.2% | 9.7% | 12.5% |
| Gross Leverage | 0.8x | 0.9x | 0.9x | 0.9x | 1.2x |
| Interest Coverage | 39.9x | 32.2x | 29.6x | 24.0x | 20.2x |
| EBITDA Margin | 24.9% | 18.5% | 20.2% | 20.3% | 19.1% |
CreditSight View Comment
AS OF 21 Feb 2025We maintain our Outperform recommendation on Alibaba post its decent F3Q25 results; topline growth were ahead of expectations thanks to improving monetization of domestic eCommerce and cloud demand accelerated; though, wider losses for international eCommerce weighed on EBITDA margin, and higher capex for cloud/AI led to a fall in FOCF; debt metrics remained modest and net cash expanded. We expect Alibaba’s topline growth (excl. Sun Art and Intime) to accelerate over F4Q25 and FY26; we expect EBITDA margin to stay flat, but FOCF to trend lower on a material increase in capex for cloud; we expect Total debt/EBITDA to remain stable, and Alibaba to maintain its healthy net cash position. We view the credit as a core holding in China and Asia IG; we like its 2030 and 2031 in particular.
Recommendation Reviewed: February 21, 2025
Recommendation Changed: August 05, 2022
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International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Search topics about wealth insights and investments.T-Mobile US
- Sector: Technology Media and Telecommunications
- Sub Sector: Telecommunications
- Region: US
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Fundamental View
AS OF 18 Mar 2025We expect T-Mobile will maintain its position as the industry leader in postpaid phone net additions, service revenue and EBITDA growth in 2025. We think the company has significant subscriber runway remaining in the suburban/rural and enterprise markets.
Adjusted net leverage (2.4x at 4Q24) is 0.3x/0.5x lower than AT&T/Verizon. Relatively strong EBITDA growth and a modest dividend commitment results in greater financial flexibility than peers.
T-Mobile benefits from the strongest spectrum position in the industry, including an average of 181 MHz in the 2.5 GHz band, which results in better 5G network coverage than AT&T and Verizon.
Business Description
AS OF 18 Mar 2025- TMUS is the one of the top 3 U.S. wireless carriers and is owned ~50% by Deutsche Telekom (DT). On April 1, 2020, TMUS and S completed an all-stock merger, valuing S at an EV of approximately $59.7 bn.
- TMUS ended 4Q24 with ~130 mn customers, including 104 mn postpaid and 25 mn prepaid.
- TMUS reaches 330+mn POPs with its Extended Range 5G network (using the 600 MHz spectrum) and reaches 300mn customers with its Ultra Capacity 5G.
Risk & Catalysts
AS OF 18 Mar 2025Converged wireless/broadband offers from cable operators raises the risk of pricing pressure in the mature consumer wireless market.
The company has not shied away from acquisitions. T-Mobile recently acquired Mint Mobile and announced deals for US Cellular and two FTTH JVs (Lumos and MetroNet). So far, M&A has not had much impact on T-Mobile’s credit metrics, but further moves into FTTH may be received poorly by investors.
With T-Mobile’s credit rating now comfortably in the mid-BBB area and leverage in the vicinity of the group’s mid-2x target area, we expect the company’s capital allocation to shift toward shareholder returns.
Key Metric
AS OF 18 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 68,397 | 80,118 | 79,571 | 78,558 | 81,400 |
| Organic Revenue Growth | 5.8% | 7.3% | (0.7%) | (1.3%) | 3.6% |
| EBITDA | 24,557 | 26,924 | 27,821 | 29,428 | 31,864 |
| Adj. EBITDA Growth | 4.3% | (64.0%) | 33.9% | 5.8% | 8.3% |
| Adj. EBITDA Margin | 35.9% | 33.6% | 35.0% | 37.5% | 39.1% |
| CapEx % of Sales | 16.1% | 15.4% | 17.6% | 12.5% | 10.9% |
| Total Debt | 76,660 | 79,574 | 78,425 | 83,586 | 84,255 |
| Net Debt | 66,275 | 72,943 | 73,918 | 78,451 | 78,846 |
| Gross Leverage | 3.5x | 3.4x | 3.0x | 2.9x | 2.7x |
| Net Leverage | 0.0x | 3.0x | 2.7x | 2.6x | 2.4x |
| Interest Coverage | 9.0x | 7.2x | 8.0x | 8.3x | 8.7x |
| FCF as % of Debt | 14.1% | 13.7% | 13.2% | 19.2% | 23.0% |
CreditSight View Comment
AS OF 25 Apr 2025We expect TMUS will once again lead the Big 3 in major KPIs in 2025, including ~5% EBITDA growth. We view earnings/growth visibility as higher than peers, with the outlook supported by its leading 5G mid-band coverage (over 300 million PoPs with ~200 MHz) and historical under-penetration in rural and enterprise markets. T-Mobile also boasts the lowest leverage (~2.3x) and strongest FCF/debt ratio amongst the Wireless Big 3, while its rising FCF generation and comparatively low dividend commitment provide flexibility for selective M&A. Despite the rising focus on convergence, we believe TMUS will stick with its off-balance sheet strategy for FTTH JVs and view the risk of a transformational broadband acquisition (ILEC or cable) as extremely low.
Recommendation Reviewed: April 25, 2025
Recommendation Changed: March 18, 2021
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International Container Terminal Services Inc
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Woori Financial Group
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Search topics about wealth insights and investments.PLDT
- Sector: Media and TelecommunicationsTechnologyTechnology Media and Telecommunications
- Sub Sector: Telecommunications
- Country: Philippines
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Fundamental View
AS OF 17 Mar 2025PLDT’s FY24 results were stable as expected; we see a modestly improving FY25 credit outlook aided by resilient EBITDA growth and residual PHP 11 bn of tower sales, which could offset persisting high capex.
A potential stake sale of the data center business could drive further deleveraging.
While the spillover of a PHP 33 bn capex overrun to FY25 could weigh on free cash flows, we draw mild comfort that it was likely not due to fraud but rather a management misstep.
Business Description
AS OF 17 Mar 2025- PLDT is a leading telecom operator in the Philippines, competing alongside its main rival Globe Telecom in a predominant duopoly.
- PLDT provides 2G/3G/4G mobile, fixed-line, broadband, enterprise data, and other digital services to retail and corporate customers.
- PLDT operates through 2 main business segments – “Wireless Services” and “Fixed Line Services”.
- Its “Wireless” segment offers mobile voice, mobile SMS, mobile data and mobile broadband services to retail customers in the Philippines. These services are marketed under the “Smart Postpaid”, “Smart Prepaid”, "Sun Postpaid" and “TNT Prepaid” brands.
- Its “Fixed Line Services” segment provides fixed line voice, corporate data and home broadband services to retail and corporate customers in the Philippines.
- PLDT commercially launched 5G services on a small-scale basis in Jul-2020. It currently has over 3,000 5G sites nationwide.
- PLDT maintains dominant market shares in the mobile, fixed line voice, and the home broadband spaces.
- PLDT is backed by three established corporate groups, namely First Pacific (~15% stake), NTT Corporation (~12% stake) and JG Summit Holdings (~7% stake).
Risk & Catalysts
AS OF 17 Mar 2025Aggressive expansion by new entrant DITO over the next 2-4 years could chew away at PLDT’s market share and restrain recoveries in average revenues per user (ARPU).
PLDT incurs significant capex that has restrained improvements in its leverage metrics and free cash flows. This is worsened by a recent capex overrun that has induced mild corporate governance uncertainties (though these have eased in recent months).
Consistently high dividend payouts could worsen PLDT’s already negative free cash flows.
PLDT is exposed to $/PHP depreciation risks ($300 mn 2050 bond is fully unhedged).
Key Metric
AS OF 17 Mar 2025| PHP bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 67.0% | 68.3% | 71.9% | 73.3% | 74.2% |
| Net Debt to Book Cap | 55.9% | 62.3% | 65.7% | 69.3% | 72.0% |
| Debt/Total Equity | 202.9% | 215.2% | 256.2% | 273.9% | 287.5% |
| Debt/Total Assets | 42.2% | 43.8% | 46.8% | 49.6% | 53.8% |
| Gross Leverage | 2.7x | 2.8x | 2.9x | 2.9x | 3.0x |
| Net Leverage | 2.2x | 2.6x | 2.7x | 2.8x | 2.9x |
| Interest Coverage | 7.8x | 8.1x | 7.4x | 6.5x | 6.1x |
| EBITDA Margin | 50.4% | 50.7% | 48.7% | 49.1% | 51.1% |
CreditSight View Comment
AS OF 17 Mar 2025We have a Market perform recommendation on PLDT and would avoid its 2050 bond. PLDT 2031 trades fairly to Globe 2030, Axiata 2030, and Bharti 2031. We do not like the PLDT 2050 that provides a low spread pickup of just 4 bp wider versus the PLDT 2030. We are comfortable with PLDT’s sturdy credit profile aided by a resilient broadband business and tower sales, cushioning high capex and dividends. A minority stake sale of its data center business is also credit positive. Corporate governance fears have also eased post its capex overrun in end-2022. We are watchful of strong competition in the mobile space due to DITO’s ramp up.
Recommendation Reviewed: March 17, 2025
Recommendation Changed: May 31, 2022
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International Container Terminal Services Inc
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Woori Financial Group
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Search topics about wealth insights and investments.Globe Telecom
- Sector: TechnologyTechnology Media and Telecommunications
- Sub Sector: Telecommunications
- Country: Philippines
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Fundamental View
AS OF 17 Mar 2025Globe’s FY24 earnings grew modestly, with leverage metrics remaining stable. We believe credit metrics may improve modestly in FY25 as modest EBITDA growth, lower YoY capex, and residual tower sales closures through 1H25 are negated by sluggish revenues.
While we acknowledge the stiff competitive pressures brought about by new entrant DITO, the impact is mitigated by Globe’s still-dominant mobile market position and DITO’s slowing expansion (given its weak financials and the costly capex involved).
Weakness in the broadband business has lessened since 3Q24 and could stabilize by mid-2025.
While Globe earlier raised the upper end of its dividend policy, we expect dividend payouts to remain stable.
Business Description
AS OF 17 Mar 2025- Globe is a leading telecom operator in the Philippines, competing alongside its main rival PLDT in a duopoly setting.
- Globe provides 2G/3G/4G mobile, fixed-line, broadband, enterprise data, and other digital services to retail and corporate customers.
- Globe operates through 2 main business segments – “Mobile Services” and “Fixed Line and Home Broadband Services”.
- Its “Mobile Services” segment offers mobile voice, mobile SMS and mobile data services to retail customers in the Philippines. These services are marketed under the “Globe Postpaid”, “Globe Prepaid” and “TM” brands.
- Its “Fixed Line and Home Broadband Services” segment provides fixed line voice, corporate data and home broadband services to retail and corporate customers in the Philippines.
- Globe commercially launched 5G services on a small-scale basis in Jun-2019. It currently maintains 5G coverage of 96% of the National Capital Region, with over 2,000 5G sites nationwide.
- Globe maintains dominant market shares in the mobile data, voice and SMS space (FY22 revenue market share [RMS] of 52% vs PLDT 40%), but loses out to PLDT in the home broadband space (FY22 RMS of 28%-30% vs PLDT 48%-50%).
- Globe is largely owned by two established corporate groups – Ayala Corporation (~47 stake) and Singtel (~43% stake).
Risk & Catalysts
AS OF 17 Mar 2025Globe faces mounting competitive pressures from new mobile entrant DITO and incumbent broadband competitor PLDT.
Aggressive expansion by new entrant DITO over the next 2-4 years could chew away at Globe’s market share and restrain recoveries in average revenues per user (ARPU).
Globe incurs heavy capex that has pressurized its leverage metrics and free cash flows. That said, capex had peaked in FY23 and should meaningfully decline ahead.
Consistent dividend payouts could weigh on Globe’s free cash flows; Globe recently raised the upper end of its dividend policy from 75% to 90% of net income, suggesting an increased skew to shareholder-friendly actions.
Key Metric
AS OF 17 Mar 2025| PHP bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 67.2% | 69.4% | 67.5% | 69.7% | 70.2% |
| Net Debt to Book Cap | 59.4% | 63.0% | 63.7% | 66.6% | 66.4% |
| Debt/Total Equity | 204.5% | 227.2% | 208.1% | 230.5% | 235.8% |
| Debt/Total Assets | 49.8% | 56.7% | 57.1% | 60.3% | 62.4% |
| Gross Leverage | 2.2x | 3.3x | 3.9x | 4.3x | 4.4x |
| Net Leverage | 1.9x | 3.0x | 3.7x | 4.1x | 4.2x |
| Interest Coverage | 9.3x | 7.6x | 5.9x | 4.6x | 4.3x |
| EBITDA Margin | 48.7% | 46.7% | 46.7% | 47.7% | 49.7% |
CreditSight View Comment
AS OF 17 Mar 2025We have a Market perform recommendation on Globe with a preference for its c.2026 perp. Globe 2030 trades slightly wider to PLDT 2031 that we view as fair. Globe c.2026 perp trades at a juicy 1.4x perp-to-Globe 2030 senior multiple that we view as attractive for short-dated “IG” paper. We anticipate a modestly improving credit outlook as lower capex and residual tower sales closures are offset by a continued weak broadband business and sticky dividends. Stiff competition in both the mobile and broadband spaces is a key concern too. Globe also recently revised its dividend policy to 60%-90% of PAT from 60%-75% previously, suggesting an increased skew towards shareholder-friendly actions, though this has not happened yet.
Recommendation Reviewed: March 17, 2025
Recommendation Changed: June 18, 2024
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International Container Terminal Services Inc
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Woori Financial Group
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Search topics about wealth insights and investments.Meta Platforms
- Sector: TechnologyTechnology Media and Telecommunications
- Sub Sector: Technology
- Country: US
- Bond: META 4.95 33
- Indicative Yield-to-Maturity (YTM): 4.95%
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Fundamental View
AS OF 25 Feb 2025We are encouraged by Meta’s strong advertising growth relative to peers in 2023 and 2024. Meta has extremely strong credit metrics of 0.3x gross leverage and $49 bn net cash. We continue to expect Meta to be a regular/annual issuer to fund its shareholder returns and massive investments in AI and the metaverse.
Longer term, we expect Meta to adhere to its previously communicated financial policy of maintaining a positive or neutral cash balance. Meta does have legal and regulatory risks notably an FTC suit that seeks to unwind its prior acquisitions of Instagram and WhatsApp. However, not all event risk is negative as Meta would be the greatest beneficiary from a potential TikTok ban.
Business Description
AS OF 25 Feb 2025- Meta Platforms is the largest social networking company in the world. Meta generates substantially all of its revenue from advertising which includes Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications.
- In 4Q24, Family of Apps was 98% of revenue (96.7% from advertising and 1.1% from other) and Reality Labs was 2% of revenue. Reality Labs generated $17.7 bn in operating losses during LTM 4Q24 as the company is investing heavily in the metaverse.
- There are 3.35 bn Family Daily Active People (DAP) as of 4Q24, and the Family Average Revenue per Person (ARPP) was $14.25 quarterly in 4Q24.
- Meta is headquartered in Menlo Park, California. Employee headcount was >74k at 4Q24.
Risk & Catalysts
AS OF 25 Feb 2025In December 2020, the FTC filed a lawsuit against Meta targeting its acquisitions of Instagram and Whatsapp. If Meta is forced to unwind prior acquisitions, this would be a credit negative given reduced scale and diversification.
Meta’s business model relies almost entirely on user-generated content. As such, there are risks related to customer privacy (e.g., Cambridge Analytica data scandal in 2018) and regulatory changes (e.g., Section 230 protections).
In April 2024, the US signed into law a bill requiring a sale or ban of TikTok, although Trump signed an executive order instructing the Attorney General to not enforce the TikTok ban for 75 days (to 4/5/2025). If a ban is implemented, this would positively impact Meta and others with competing short-form video products.
In October 2022, activist Altimeter Capital wrote a letter to Zuck and Board although it was on the friendly-side of activism and some suggestions have already been implemented.
Key Metric
AS OF 25 Feb 2025| $ mn | 2020 | 2021 | 2022 | 2023 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue YoY % | 21.6% | 37.2% | (1.1%) | 15.7% | 21.9% |
| EBITDA | 46,069 | 63,882 | 49,622 | 71,955 | 101,568 |
| EBITDA Margin | 53.6% | 54.2% | 42.6% | 53.3% | 61.7% |
| CapEx % of Sales | 18.3% | 16.3% | 27.5% | 20.8% | 23.8% |
| Sh. Ret. % of CFO-CapEx | 27% | 116% | 152% | 46% | 68% |
| Net Debt | (61,954) | (47,998) | (30,815) | (47,018) | (48,989) |
| Gross Leverage | 0.0x | 0.0x | 0.2x | 0.3x | 0.3x |
| EV / EBITDA | 15.8x | 14.0x | 5.8x | 12.3x | 14.5x |
CreditSight View Comment
AS OF 01 May 2025We are encouraged by Meta’s strong advertising growth relative to peers in 2023, 2024, and 1Q25. Meta has extremely strong credit metrics of 0.3x gross leverage and $41 bn net cash. We continue to expect Meta to be a regular/annual issuer to fund its shareholder returns and massive investments in AI and the metaverse. Longer term, we expect Meta to adhere to its previously communicated financial policy of maintaining a positive or neutral cash balance. Meta does have legal and regulatory risks notably an FTC suit that seeks to unwind its prior acquisitions of Instagram and WhatsApp. In addition, the recent EC decision could have an impact as early as 3Q25. However, not all event risk is negative as Meta would be the greatest beneficiary from a potential TikTok ban.
Recommendation Reviewed: May 01, 2025
Recommendation Changed: April 18, 2024
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International Container Terminal Services Inc
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Woori Financial Group
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Search topics about wealth insights and investments.Amazon.com
- Sector: ConsumerTechnology Media and Telecommunications
- Sub Sector: Retail/GrocersTechnology
- Region: US
- Bond: AMZN 4.65 29
- Indicative Yield-to-Maturity (YTM): 4.021%
- Credit Rating : A1/AA/AA-
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Fundamental View
AS OF 25 Feb 2025- We continue to have confidence in CEO Andy Jassy and the company’s long-term business for both AWS and Stores. The recent operating trends reinforce our views particularly the margin improvement. We continue to believe that Amazon is an underappreciated winner in Generative AI given the breadth of its cloud business and offerings including custom silicon and its platform Bedrock.
- Gross leverage declined to 0.4x and 0.9x on a lease-adjusted basis. While Amazon is increasing its capex spend (along with the other hyperscalers), we are encouraged by its debt reduction and zero shareholder returns. Also, Amazon’s equity cushion is ~$2.2 tn. There are risks related to the FTC suit although we expect those to be addressed by behavioral remedies, and we view a breakup as unlikely.
Business Description
AS OF 25 Feb 2025- Amazon is an e-commerce company which sells a wide range of its own products and those of 3rd party sellers. Amazon offers fulfillment services for 3rd party sellers (FBA) and sells cloud computing services (AWS). In 4Q24, 3rd party units were 62% of total paid units, and FBA units are a majority of 3rd party units.
- In LTM 4Q24, NA segment was 61% of sales, International was 22% of sales, and AWS was 17% of sales.
- Amazon disclosed it surpassed 200 mn Prime members in April 2021. The annual membership was increased in February 2022 from $119 to $139 in the US, although fees vary by country. In mid-2019, Amazon Prime began to transition from 2-day to 1-day shipping. Amazon Prime also offers Prime Video, streaming music, and other benefits.
- In 2006, Amazon launched AWS which remains the leader in cloud computing (IaaS/PaaS). Amazon sells its own devices (e-reader, smart speaker, streaming media player, etc.).
Risk & Catalysts
AS OF 25 Feb 2025- We think Amazon has moderate event risk given its large size (~$2.2 tn market cap).
- While Amazon is increasing its CapEx spend, we are encouraged by the $14 bn reduction in lease-adjusted debt from year-end 2022 through year-end 2024.
- Amazon continues to face regulatory scrutiny. In September 2023, the FTC and 17 states filed a lawsuit against Amazon and accused the company of (1) punishing sellers for offering lower prices elsewhere and (2) making Prime eligibility conditional on usage of fulfillment services. The biggest risk would be a breakup, although we view that as unlikely.
- Amazon’s $14 bn acquisition of Whole Foods has shown its proclivity for large M&A, although the regulatory environment could make large deals challenging.
Key Metric
AS OF 25 Feb 2025| $ mn | 2020 | 2021 | 2022 | 2023 | LTM 4Q24 |
|---|---|---|---|---|---|
| Revenue YoY % | 37.6% | 21.7% | 9.4% | 11.8% | 11.0% |
| EBITDA | 57,284 | 71,994 | 74,593 | 110,305 | 144,162 |
| EBITDA Margin | 14.8% | 15.3% | 14.5% | 19.2% | 22.6% |
| CapEx % of Sales | 12.1% | 13.3% | 11.5% | 8.5% | 12.3% |
| Sh. Ret. % of CFO-CapEx | 0% | 0% | (49%) | 0% | 0% |
| Net Debt | (50,497) | (44,771) | 7,316 | (19,598) | (43,202) |
| Gross Leverage | 0.6x | 0.7x | 1.0x | 0.6x | 0.4x |
| EV / EBITDA | 28.3x | 23.3x | 11.7x | 14.4x | 16.1x |
CreditSight View Comment
AS OF 02 May 2025We continue to have confidence in CEO Andy Jassy and the company’s long-term business for both AWS and Stores. AWS is now a $117 bn run-rate business and delivered record operating margin of 39.5% in 1Q25. We continue to believe that Amazon will be a winner in Generative AI given the breadth of its cloud business and offerings including custom silicon (Trainium, Inferentia) and its platform Amazon Bedrock. We estimate leverage was roughly flat at 0.4x gross and 0.9x lease-adjusted gross. While Amazon’s capex has been ramping, along with other hyperscalers, we are encouraged by its debt reduction over the past few years and zero shareholder returns. Also, Amazon’s market cap is $2.1 tn. There are risks related to the FTC suit although we view a breakup as unlikely.
Recommendation Reviewed: May 02, 2025
Recommendation Changed: May 01, 2024
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