JP Morgan recommends overweighting in telecom!
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JPMorgan Issues Mid-year European Telecoms Review; Sector Overview, Relative Value Commentary, Supply Expectations, Credit Outlook
Source: Business Wire
Publication date: 2001-07-18
LONDON--(BUSINESS WIRE)--July 18, 2001--JPMorgan today published its mid-year European Telecoms Review: `Sending a Clear Message to Investors.' The 106-page report, which provides an overview of the telecom sector, includes a relative value commentary, supply expectations and the firm's credit outlook for the remainder of the year. It also includes individual analysis on 16 companies. In the comprehensive report, the firm:
- Recommends an overweight on the Telecoms sector based on improving fundamentals and technical factors.
- Believes debt reduction, operating margin improvement and
equity valuations will continue to be the main drivers for
telecom bonds. Although JPMorgan believes that a few
companies, such as France Telecom and KPN, could still slip a notch or two over the coming months, most companies are at, or near their rating floors. In fact, the sector has seen the worst of the expected downgrades and is looking at a favourable outlook beyond 2001.
- Expects little supply for the rest of 2001 compared with
roughly EUR55 billion of issuance seen year to date. In the
first half of 2001, the European high-grade telecom sector has seen about EUR55 billion of new supply, including several multi-billion benchmark transactions from the likes of British Telecom, France Telecom, Telecom Italia, KPN and Deutsche Telekom. Most of these transactions were the refinancing of bank loans that were raised after last year's UMTS licence fees and acquisitions. Given Morgan's estimates of EUR60-70 billion of total supply for the year, it expects only small-scale bond issuance for the remainder of 2001.
- Top picks are British Telecom and Telecom Italia, while
Telefonica's $ bonds offer good value. Over the next couple of quarters, JPMorgan expects most investors to actively trade the telecom sector in order to find interesting relative value opportunities. The most likely candidates for outperformance are BT and TI, which the firm believes are stable-to-improving credits that still offer attractive valuations relative to their peers.
For a copy of the106-page report, contact the names below or visit www.jpmorganchase.com .
J.P. Morgan Chase & Co. is a premier global financial services firm with assets of $714 billion and operations in more than 50 countries. The firm is a leader in investment banking, asset management, private equity, custody and transaction services, retail and middle market financial services, and e-finance. Headquartered in New York, JPMorgan Chase serves more than 30 million consumer customers and the world's most prominent corporate, institutional and government clients.
Publication date: 2001-07-18 |
