Goldman downgrades Zain to ‘sell’
Kuwait, April 14, 2010
Goldman Sachs downgraded Kuwaiti telco Zain to 'sell' from 'neutral', saying that the market had reacted 'too positively' to the sale of Zain's African assets to Bharti Airtel for $9 billion.
The brokerage said Zain had one of the lowest real growth outlooks among its peers in Central Eastern Europe, Middle East and Africa (Ceemea) due to a deteriorating home market.
'The completion of the deal with Bharti and dividend payment should remove the corporate event support that the stock currently enjoys,' Goldman analysts wrote in a note.
Goldman also cut its rating on Qatar Telecom to 'neutral' from 'buy' and said stiff competition and poor performance in the domestic market would hurt the shares.
The brokerage expects Russia, Egypt and Nigeria to be the most attractive wireless telecom markets in the region over the next five years.
It named Russia's Mobile TeleSystems, VimpelCom and Egypt's Mobinil as its top picks as they consistently delivered superior returns compared to peers.
Goldman upgraded Mobinil to 'buy' from 'neutral', citing the company's high real growth potential, capex efficiency and low taxation.
'We expect Mobinil to keep generating superior returns on capital, which should help the stock to re-rate,' it said.
The brokerage also raised South Africa's MTN to 'buy' from 'neutral' and added it to its Ceemea focus list, saying the company's high and sustainable returns would eventually translate into a premium valuation for the stock. – Reuters
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