Steve...there is actually nothing negative at all about my firm's downgrade on Telesp, and new SELL rating on Telerj. Quite the opposite, in fact!. Let me explain:
We've made quite a controversial call today. For quite a while now, the rest of the street (ourselves included) have been urging investors to concentrate on TELESP for 2 main reasons:
1. It is the choicest single piece in the Telebras empire
2. Safer to have Telesp than TBR, due to increasing uncertainty as to how TBR holders would be treated...ie that old chestnut about the 12 different subs all being listed....even if listed, will they be liquid, etc etc.
In short, the recommendation worked a treat, with Telesp almost hitting our price target already. (it's had a big outperformance over TBR in past month or so). BUT....now things have changed.
For starters, as I said, the stock has already rallied (telesp, that is). Second, (and more of interest to readers of this thread), we feel that the creation of these local ADR-like receipts + good noises coming out of the NYSE and SEC mean that people ought to be far happier owning the parent TBR again. In other words, our downgrade on Telesp should be viewed as RELATIVE to TBR....we are saying it is time to switch back the other way....sell your Telesp, and BUY TBR. Hope that made sense.
On Telerj, which we rated SELL, we are basically questioning the whole basis on which some of our competitors have valued the stock. They seem to be making comparisons to other countries based on population numbers (ie....look how many brazzos there are still without a phone!)....It seems to us though that they have not paid sufficient attention to the BUYING POWER of these brazzos. Per capita income is MUCH MUCH lower than in other markets they are using as benchmarks. In short, we are starting to think that the street is getting a little too carried away with the cellular potential, and perhaps not carried away enough with the fixed line business.
DISCLAIMER - as always kids, the comments written here are my PERSONAL ones. In no way is DMG "sponsoring" my posts, nor will they.
Jeremy |
