BUENOS AIRES -(Dow Jones)- Shares of Telecom Argentina SA (TEO, TECO2.BA) have been “overlooked and undervalued,” Barclay’s Capital said in a market note Monday.
Barclays said it was initiating coverage on Telecom Argentina, one Argentina’s leading telecommunications providers, and set its target price the for company’s American depository receipts at $29, with upside potential toward $33. Telecom Argentina’s shares were trading at $25.30 in New York in afternoon trading Monday.
Barclays is bullish on the South American telecom company due to a “a healthy macro backdrop with upside potential from possible sovereign credit market repair,” a three-player telecom market with a “rational competitive environment,” recent improvement in mobile-phone operating performance, and “attractive valuation with upside potential to dividends and from a possible re-levering of the balance sheet in the future,” Barclays said.
During the third quarter, Telecom Argentina saw its net profit rise 47% on the year to 444 million pesos ($112 million). Sales for the quarter rose 21% to ARS3.8 billion.
The company’s earnings for the first nine months of the year increased 30% to ARS1.3 billion. Sales for the same period rose 18% to ARS10.5 billion on the back of higher revenue from its mobile business, where customers increased 13% to 17.8 million.
In addition, in October Argentina’s antitrust agency approved a deal that saw Telecom Italia SpA (TI, TIT.MI) increase its stake in Telecom Argentina as part of an agreement with the local Werthein Group.
Telecom Italia and the Werthein Group had been locked in a bitter feud for over a year, but in August the two reached a deal whereby Telecom Italia increased its stake in holding company Sofora, which indirectly controls Telecom Argentina, to 58% from 50%, leaving the Wertheins with 42%.
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