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

To: djane who wrote (7677)	9/9/1998 2:16:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Here's some radical contrarian thinking for ya all... We all expected great fortunes by now but instead the stock did an absolutely unbelievable about face and defied all the bullish factors surrounding it. Now most folks seem to be on the looooong time till recovery and going much lower train. I think this has the potential to turn into a real analyst blaster. If these companies were to list in Brazil tomorrow, based on the current stock price of $60, I figure they'd list at the following prices: Company Percent of ADR Listing Value ======= ============== ============= Telesp Participacoes 25.6% $15.36 Tele Norte-Leste 29.5% $17.70 Tele Centro-Sul 15.3% $ 9.18 Telesp Celular 2.8% $ 1.68 Tele Sudeste Celular 2.4% $ 1.44 Telemig Celular 1.2% $ 0.72 Tele Sul Celular 1.4% $ 0.84 Tele Centro Celular 1.5% $ 0.90 Tele Norte Celular 0.5% $ 0.30 Tele Leste Celular 0.7% $ 0.42 Tele Nordeste Celular 0.9% $ 0.54 LONG DISTANCE ============= Embratel 16.8% $10.08 Assuming decent earnings which are expected to be released with the listings, and some strong strategic statements from the new buyers (Telefonica has press conference scheduled for Sept 17 I believe), it seems possible to me that the long speculated frenzied buying could still take place. Look at how cheap these things could be. All of a sudden we won't be talking a $60-$100 stock, and it sounds like only Telesp may remain in the Bovespa index. For that matter, the mandatory reweighting of the index may really skew the investment communities perception of the index's trading range and this may help also...Really nothing to compare against. I think based on these prices, folks may load up across the board and just throw 'em in an account and not look back for a few years. I'm certainly not counting on it, and have reduced my exposure to this stock by over 50%, but I'll be watching close. I think the next 30-45 days could surprise us yet. Rose colored glasses back off. sf

To: djane who wrote (7677)	9/9/1998 3:20:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

CNBC's FABER REPORT:Telebras ADRs Cheap, But Concerns Linger Dow Jones Newswires The following report was aired on CNBC-TV by CNBC reporter David Faber: Imagine if you will that it's 1984 and the breakup of the Bell telephone system is getting underway, and the separation of the Baby Bells and AT&T from Ma Bell takes place and the stocks of all the companies are soon to trade independently and Ma Bell's stock price is riding high and then Ma Bell, arguably the biggest and most important stock in the country, loses half of its market value. That scenario has in fact unfolded over the last two months in Brazil. And the company in question, Telebras, has in fact lost 52% of its market value since the beginning of August. Telebras is the telephone company of the world's fifth-largest country and its ninth-largest economy. It is a proxy for the Brazilian market and it will very soon become 12 separately traded companies that include no ownership by the government. What Telebras also is, say analysts, is the cheapest telecom stock they've ever seen and one that just keeps getting cheaper. In fact, any investor drawn in by that perceived value previously has been burned, and badly. How cheap is it now? Merrill Lynch calculates the current multiple to 1998 Ebitda at 2.7 times and estimates that Ebitda will grow 20% next year. Merrill does add that the growth rate will slow. Morgan Stanley's analysts estimate the current P/E at 5.5 and on next year's earnings at 5. The ADR's currently trading $25 below book value. Morgan Stanley advised the government on the privatization and told clients yesterday that the 12 new companies created through the split of Telebras will list on the Sao Paulo exchange on Sept. 19, to be followed later this month or early next by listings here in New York. A key to the split of Telebras was the sale by the Brazilian government of its ownership stake in the companies that have been spun off. That so-called auction raised more than $19 billion and has given controlling stakes in the wireless, local phone, and long distance companies created to the likes of MCI, Spain's Telefonica, and Telecom Italia. Telfonica spent $5 billion alone for control of Sao Paulo's phone company and another $1.1 billion for a cellular provider. MCI shelled out $2.3 billion for control of Brazil's long distance company, Embratel. In fact, those buyers paid enormous premiums over the minimum price set by the government and, as Merrill Lynch reports, the premium paid over the current ADR price is staggering. Merrill figures that the implied value of the ADRs given the bids in the auction is $295 per ADR, roughly five times the current stock price. And yet, the companies are expected to stick by their bids. An MCI spokeswoman said the company is in Brazil for the long term, has taken control of Embratel, and expects enormous growth. So do analysts, who point out that Brazil has only 11 phone lines and 3 mobiles per 100 people. Still, the continued concern in the market centers on a devaluation in the Brazilian currency. If such a devaluation were to come, analysts say that while line growth wouldn't be hurt, usage would, and so would the stock price.