Quebecor Inc. (TSX: QBR.B) is one of the leading integrated communications company in Canada and operates in telecommunications, entertainment, news media and culture segment.

The Board of Directors declared a quarterly dividend of CAD 0.20 per share, payable on June 23, 2020.

Q1FY20 Financial Highlights: Quebecor posted an impressive set of numbers and reported revenue of CAD 1,055.5 million, as compared to CAD 1,027.3 million in pcp. The Group witnessed decent growth in its telephony service, aided by a higher number of subscriber connections. A significant improvement in the customer equipment sales further supported the topline. Revenues from Internet access services increased 1.4% on y-o-y basis, while cable television services segment revenue fell 4.9% from the previous corresponding quarter due to a net decrease in the customer base. Videotron’s total ABPU stood at CAD 49.87 during Q1FY20, against CAD 49.47 in the previous corresponding quarter. Income from continuing operations soared to CAD 130.1 million from CAD 89.4 million in Q1FY19, thanks to the higher revenue along with a gain on valuation and translation of financial instruments. Higher financial expenses increase in the purchase of goods and services and higher depreciation and amortization costs remained a drag.

Q1FY20 Income Statement Highlights (Source: Company Reports) 

Valuation Methodology: Price to Cash Flow Based Relative Valuation (Illustrative)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The group’s offerings come under essential services. Due to the ongoing COVID 19 crisis, most of the people are working from home, and as a result of that, the Company is witnessing a substantial increase in traffic. During the Q1FY20, the Company has delivered an improved EBITDA and cash flows from operations aided by a solid performance from the telecommunications segment. The Company has liquidity of CAD 1.8 billion which seems sufficient enough to support the working capital requirements in the difficult times. During May 2020, the group has introduced new QUB musique, which consists of more than 50 million music tracks and has been offered at a discounted price to attract a higher customer base. We believe the above product launch would help the Company to improve its income and cash flows in the coming days. We have valued the stock using P/E based relative valuation method and have arrived at a target upside of double-digit (in percentage terms). For the said purposes, we have considered industry (Telecommunication services) average on NTM basis. Hence, we recommend a ‘Buy’ rating on the stock at the current market price of CAD 28.99 on May 22, 2020.    

QBR.B Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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