Friedman Billing reiterated $38 target, again
RESEARCH
Brief August 12, 1999
Technology
Update
IDT Corp (IDTC - $15 1/16*) *Intraday Price Buy
Riyad M. Said (703) 312- rsaid@fbr.com
Min Cho (703) 312- mcho@fbr.com
Strategic Relationship with Telefonica SA.
* IDT and Telefonica SA of Spain sign joint venture agreement.
* IDT to acquire 10% stake in undersea cable project.
* We reiterate our Buy rating and 12-month price target of $38.
FY July 1999E 52-week range $35 - 9 1/2 Cash & Equiv (mil) $102.9 1Q Oct $0.08 $0.14 A $0.10 Shares out (mil) 36.0 Long-term debt (mil) $112.0 2Q Jan $0.12 $0.06 A $0.12 Estimated float (mil) 18.3 Enterprise value (mil) $551.4 3Q Apr $0.15 $0.06 A $0.14 Avg daily volume 1,478,700 4Q Jul $0.20 $0.08 $0.17 Market cap (mil) $542.3 FY July EPS Rev (mil) FY EPS $0.56 $0.33 $0.54 Book value $6.94 1998A $0.56 $335.4 CY EPS $0.54 $0.36 $0.75 Est. CAGR - 5-yr EPS 30% 1999E $0.33 $687.4 CY P/E 27.9x 42.4x 20.2x Institutional Ownership 41% 2000E $0.54 $942.6 Rev mult 1.6 x 0.8 x 0.6 x Financial Data - 4/99 Earnings Per Share Stock Data
IDT and Telefonica SA of Spain today announced a broad joint venture agreement. The two companies will jointly market telephone and Internet services to Spanish speakers in the U.S. and Latin America. Telefonica is Spain?s dominant telecom carrier, and has a major presence in Latin and South America, including operations in Venezuela, Puerto Rico, Peru, Guatemala, El Salvador, Colombia, Chile and Brazil. Services will include pre-paid calling cards, potentially including prepaid cellular, and may include linking Telefonica?s Ole! Web portal with IDT?s Nuestra Voz Internet service. IDT will own 49% of this joint venture and will initially invest about $10 million. We believe this relationship is a win-win, as it enables Telefonica to leverage IDT?s distribution channels and back-office capabilities in the U.S. and should expand IDT?s access to Latin America.
IDT to acquire 10% stake in undersea cable project. In addition to this joint venture, IDT will take a 10% stake in SAm-I, Latin America?s largest state-of-the-art undersea fiber optic communications cable network to support high capacity connectivity for voice and Internet traffic, which will link South America, Central America, the Caribbean and the United States. As part of this agreement, IDT has agreed to buy at least $100M of communications capacity from the cable project over five years. Once this system is completed, IDT should benefit from more favorable transport costs between the connected areas, as well as from its equity in the resale of capacity on the cables.
We reiterate our BUY rating and $38 price target. We believe that this strategic relationship has the potential to accelerate both top line and bottom line growth for IDT over time. These developments, combined with the valuation disconnect that continues to exist relative to the value of IDT?s 57% stake in Net2Phone (NTOP-NR), present a significant buying opportunity at these levels. |
