Patria downgraded its recommendation on Cesky Telecom from accumulate to hold yesterday, reflecting the narrowed valuation gap between our decreased target price (from CZK 337 to CZK 330 per share), and the strong stock performance in recent weeks.
While not attractive to growth-seeking investors, the stock is appealing due to high its dividend yields (POR exceeding 100%) that can be expected after 2005 (a 70% POR is expected in 2004 and 2005). The major non-fundamental risk is represented by a possible stock-hangover issue related to 27% of the company’s stock held by Telsource (a 51/49 JV of KPN/Swisscom). SEC informed it did not approve the proposal for the buy-out of the minority shareholders in Ceske radiokomunikace (Cra) made by Bivideon. SEC stated that the buy-out price proposed at CZK 245 per share does not correspond to its fair value.
This may provide a psychological boost for Cra stock.
Jiri Soustruznik