Patria downgraded its long-term recommendation for Ceske radio from buy to hold

Patria yesterday downgraded its key long-term recommendation for Ceske radiokomunikace from buy to hold. The uncertainty concerning the expected restructuring of the group and how it will bring value to minority shareholders is the main reason for the downgrade. We see the full value of the company’s assets at CZK 693 per share, but the factor of uncertainty for the minority shareholder is paramount at the moment. We have also downgraded our short-term recommendation from accumulate to reduce, because the stock’s downside risk is probably higher than a chance of a recovery in the near term. In the longer term, there is a better chance of market confidence in the stock being restored and the discount to fair value declining. The key determinants of the stock price will be the controlling shareholder’s restructuring strategy, the market perception thereof, and telecom sector valuations. Given the present risks, buying Ceske radiokomunikace stock is suitable only for investors with above average risk tolerance.

(Ondrej Datka)