Patria yesterday upgraded its investment recommendation for Cesky Telecom (CT) from hold to buy as the stock currently offers 21% upside to our (unchanged) target price of CZK 330 per share. The sale of TelSource's 27% stake in CT for CZK 255 per share completely removes overhang fears, which recently depressed the stock price significantly below our estimates of its fundamental value. While not appealing to growth investors, the main investment thesis in the case of CT is based on the belief that high free cash flow to equity will be transformed relatively soon into very attractive dividends.
Jitka Oppitzová