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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (517)	12/5/1997 5:00:00 PM
From: Uncle Mikey	Read Replies (1) \| Respond to of 22640

Lehman Bros Report on TBR: Headline: Telecomunicacoes Brasileiras: 10 Month Results In Line Author: Matthew Hickman 1(212)526-3362 Rating: 1 Company: TBR Country: OPR CUS CBZ CAR Industry: TELECM Ticker : TBR Rank(Prev): 1-Buy Rank(Curr): 1-Buy Price : $111 5/8 52wk Range: $169-72 Price Target:$175 Today's Date : 12/04/97 Fiscal Year : DEC Price (As of 12/03) : $111 5/8 Revenue (1997) : US$15.8 bn Return On Equity (97): 7.2% Proj. 5yr EPS Grth : 15.0% ADS' Outstanding : 320.7 m Dividend Yield : 1.3% Mkt Capitalization : US$35.8 bn P/E 1997; 1998 : 11.7 X; 9.7 X Current Book Value : US$100.80/ADS Convertible : - -Debt- to-Capital : 7.3% Disclosure(s) : None ----------------------------------------------------------------------* Telebrs reported ten month consolidated net income of US$8.75 per ADS, 31% higher than net income reported in the same period of 1996. * Excluding a capital increase of R$360 million in Telebrs' subsidiaries, the company reported net income equivalent to US$7.73 per ADS. * Driving net operating revenues (up 26.3%) was strong fixed line and cellular subscriber growth as well as improved traffic patterns. * These results are consistent with our estimates for the quarter and full year. * While Telebrs has appreciated 19.4% since October 31, Telebrs remains extremely cheap relative to the other Latin telcos. We continue to believe that Telebrs represents good fundamental value and we reiterate our 1-Buy recommendation. ----------------------------------------------------------------------Telecomunicaes Brasileiras S.A. (Telebrs) reported ten month net income of US$8.75 per ADS. However, this includes R$360 million due to the capital increase in Telebrs' subsidiaries. Excluding this increase, the company reported net income of US$7.73 per ADS for the ten month period ending October 31, 1997, 15.7% higher than net income per ADS of US$6.68 reported in the ten month period ending October 31, 1996. Net operating revenue increased 26.3% to R$12,900 million in the first ten months of the year. Fixed line growth was a main driver of revenue growth in the period. While we do not have fixed line in service data, fixed lines installed improved 14.3% year-over-year. Similarly, cellular subscribers grew 49.3% versus the first ten months of 1996. For the first time since January 1997, traffic improved sequentially in all segments. In October, international long distance traffic improved 9.7% from September 1997, local traffic increased 8.9%, and domestic long distance traffic improved slightly. Telebrs' operating expenses increased 21.7% to R$8,229 million in 10m97. Payroll expenses increased 5.2% to R$2,269m in 10m97 despite a 2.3% reduction in headcount. The company's operating margin increased from 34% in 10m96 to 38% in 10m97. Depreciation expenses increased 14.2% to R$3,355m in 10m97 from R$2,937m in 10m96. EBITDA for the quarter increased 27.3% to R$8,026m in 10m97 and, consequently, Telebrs' EBITDA margin improved slightly from 61.7% in 10m96 to 62.2% in 10m97. This is still one of the highest EBITDA margins of any Latin American telecoms services provider. ----------------------------------------------------------------------Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.