Adding Cellnex to Best Ideas List; Cash Flow Visibility With Growth and Margin Expansion Potential

We are adding narrow-moat Cellnex to our Best Ideas April 2022 list given the company’s competitive advantages, attractive unit economics and 20% upside potential compared with our EUR 52 fair value estimate. Cellnex’s 10- to 20-year tower contracts with mobile operators provide high cash flow visibility with growth optionality coming from new tenants which, coupled with towers’ operating leverage, will result in continued margin expansion. Our narrow moat is supported by switching costs as many mobile operators have no network alternatives to Cellnex’s towers. Cellnex also provides inflation protection with contracts tied to consumer price indexes, while cyclicality is low given the critical nature of wireless infrastructure. In future, we model revenue growing at midsingle digits with EBITDA margins expanding from 52% currently to more than 65% in 2030.