Bank Of America On Orange Investor Day: Increase In Capital Expenditure To Fund Growth

Orange SA ORAN this week published its 2025 Plan. The plan suggests the company is preparing to take on some short-term pain for long-term gains, according to Bank of America Merrill Lynch.

The Analyst

Frederic Boulan maintained a Buy rating on Orange, keeping the price target at 18 euros.

The Thesis

Orange’s new net cost cutting initiative could drive EBITDA, but its capital expenditure plan is sharply higher, Boulan said in the note.

The company’s latest net cost cutting initiative targets 1 billion euros by 2023 and is based on lowering indirect costs. The analyst noted that this varies from its previous “gross” cost savings plans.

Orange’s capital expenditure is now expected to increase by around 200 million euros in 2020 and remain flat in 2021, while the company had earlier indicated that it would peak in 2018, Boulan said. He added, however, that capital expenditure is expected to decline sharply by 2023.

Orange has now guided to EBITDA that is around 1% below consensus for 2020 and implies operating free cash flows about 6% short of the current projections for 2020 and 2021, Boulan mentioned.

He added that Orange had also announced the creation of dedicated TowerCo subsidiaries in France and Spain as well as a transaction involving the disposal of 1,500 towers in Spain to Cellnex for 260 million euros.

ORAN Price Action

Shares of Orange has declined almost 5% to $15.22 at the time of publishing on Wednesday.

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