After the NPF announced that 10 potential bidders have shown preliminary interest in the information memorandum, PM Stanislav Gross said the sale would be successful and meet the government’s target for price, speed and transparency. Also, Deputy PM Martin Jahn commented that the high level of interest increased the chances of a sale to a direct investor. He added that the government’s priority is now a direct sale.
CT’s share price has increased by 8.4% over the last two days to CZK 418.5, which is above our target price of CZK 402, amid strong recommendations from two London investment banks and the PM’s positive comments on the sale. While the PM’s comments and speculation that some investors may bid high prices (i.e. TDC CZK 500 per share) seem optimistic, at the current levels we remain cautious as an expression of interest in the memorandum may not necessarily lead to a bid. At a price of CZK 418.5, CT is trading at a 2005E EV/EBITDA of 5.7, while the average of western telecoms operators stands at 5.5. Note that preliminary bids are due by February 3.