Credit Suisse says to buy Magyar Telekom
Thursday, July 20, 2006, 11:02
“MTEL is down close to 11% over last three months, underperforming the European sector and many of its closer peers. The stock has, in our view, suffered both from negative sentiment towards Hungarian macro and a delay in dividend payment," István Máté-Tóth of CS said. MTEL announced around Ft 70 per share dividend for 2005, subject to closing an investigation into contracts worth around Ft 700 million (less than 1% of 2005 earnings). Credit Suisse's base case is for the investigation to close this year. Also, the ex div date for 06E dividend (May 2007) is within less than a year. Máté-Tóth said cum div Ft target price implies around 17% upside potential, while downside risks include Hungarian macro and currency, the potential of this investigation not closing for a while and MTEL's acquisitive history. The analyst said the rationale behind his decision was that current cum div price incorporated potential distribution of estimated Ft 140 per share, or about 16% of its current market cap. “At around 5x 2006E EBITDA and around 11x P/E we find MTEL attractively valued versus the broader European sector and roughly in line with EMEA peers. What makes the stock stand out in our view versus peers is the visibility on medium term dividend policy," Máté-Tóth added.
Federal Reserve Chairman Ben S. Bernanke suggested that a break from raising interest rates is near without explicitly saying so, leaving himself wiggle room in case higher inflation persists. Bernanke told the Senate Banking Committee yesterday that he's wary of lifting borrowing costs too high and said there are lags between changes in policy and their impact on the economy. Growth is already slowing, Bernanke said, and Fed forecasters expect the pace of price increases to ease as well. The chairman refrained from describing the path of rates and instead pointed to the state of the economy to imply that the two-year tightening is nearing an end. Inflation expectations, which rose in April after he specifically said the central bank may pause, were unchanged yesterday, as measured by securities linked to consumer prices. Those earlier comments led some investors to charge Bernanke was soft on inflation. „This is a more mature kind of statement,” said Credit Suisse chief economist Neal Soss, who worked as an assistant to former Fed chief Paul Volcker. „He's explaining to you what's on their mind, what's the analytical framework they're using. But he's not pre-committing to a particular course of action, because that's not appropriate under these circumstances.” (Portfolio, Bloomberg)