Cable & Wireless (CWP)
multexinvestor.com
After buying local telecom service providers around the world, the U.K.’s Cable & Wireless quickly became one of the largest phone companies in the world. But global investors fled the sector as they became aware of the cutthroat pricing associated with phone services, especially in long distance. CWP has been especially hard hit, falling from $70 in March 2000 to a recent $12.85.
Indeed, at current prices, the stock appears oversold, according to analysts. Pittsburg Research’s Steven Artuso points out that shares now trade for just half of book value. He adds that "CWP not only has billions in cash, but its debt has been substantially reduced." As a result, "it has positioned itself with enough cash to weather the telecom downturn and to profit from an eventual upturn," he writes in an October 9 retail note. Arturo then goes on to cite three possible uses of the company’s impressive cash stash.
Commerzbank’s Taco Sieburgh thinks CWP is extremely undervalued by other financial metrics. After backing out its $11 billion-plus in cash, he notes that the core business is valued at less than $800 million. In contrast, Cable & Wireless' annual sales and other fixed assets are each in excess of $6 billion.
Sieburgh thinks management may need to take a more active stance regarding its strong balance sheet. "We believe management will come under increasing pressure to explain to investors why it should be allowed to manage net cash balances of ($6 billion)." He adds that a recent divestiture may even make the company a buyout candidate. "The Optus sales increased cash by about ($3.2 billion), thus making the company more attractive to outside bidders," Sieburgh writes in a September 25 institutional report. |
