Merrill ups price target on Orascom Telecom
Cairo, June 7, 2008
Merrill Lynch raised its price objective on Arab regional mobile operator Orascom Telecom to 80 Egyptian pounds from 73.16 Egyptian pounds to reflect the company's recent share buyback.
Late last month, Orascom said it applied to buy back up to 12 million of its own shares for about $186 million, its second such offer this year. The company said it would buy shares at 83 Egyptian pounds ($15.51) per ordinary share and about $77.50 per global depositary receipt.
Merrill Lynch said the share price of Orascom, whose stock closed at 78.79 Egyptian pounds Thursday, was supported by its ability to buy back shares and prospects that the group was the subject of a friendly take-over.
The brokerage, however, retained its 'underweight' opinion on the view that valuation is unjustifiably supported by mergers and acquisitions speculation.
Telecom companies from the Gulf, India and Europe have been looking for African and Asian exposure.
Companies with reasonable scale and exposure to growth markets like Egypt's Orascom, which also operates in Algeria, Bangladesh, Tunisia, Pakistan and Zimbabwe, have been cited as attractive targets by analysts.
Bharti, 30.5 per cent owned by Singapore Telecommunications and with more than 64 million subscribers, recently failed to woo South Africa's MTN Group.
Orascom has more than 74 million subscribers. A tie-up with Bharti would rank it sixth in the world. Recently, Goldman Sachs had said Orascom may be considered a more attractive acquisition candidate than MTN.
Merrill said Orascom may be threatened by future competition in Algeria, its bid to enter Canada, and customer churn rate - a measure of customer attrition - in Pakistan.
'The challenge for investors is that while rising penetration means growth prospects are slowing, competition is also increasing in most of OTH's (Orascom's) markets,' the brokerage said.-Reuters