VimpelCom Maintaining Strength

Vimpel-Communications (VIP) delivered better-than-expected operating results in the most recent quarter, beating our estimates with strong revenue and customer growth across all its markets.

We continue to be intrigued by VimpelCom’s success in increasing sales and retaining new subscribers on a recurring basis and maintaining strong operating margin. We believe synergies from the Golden Telecom acquisition will continue to drive revenue and earnings momentum. Additionally, untapped opportunities in Eastern European markets, coupled with fresh expansion initiatives in Southeast Asia, support our forecast for strengthening financials.

We reiterate our Buy rating based on financial metric estimates which we believe are attainable. VimpelCom is trading at 10.2x our 2008 EPADS estimates which is significantly below historical levels in previous quarters, although this metric remains at a premium to its major competitor, Mobile TeleSystems (MBT) (its closest Russian peer). VimpelCom’s shares have lost approximately 50% of its value since a 52-week high reached in December 2007.

The stock price recently registered a 52-week low of $19.08, and is currently trading marginally above this level, offering a more favorable entry-point. Our revised six-month price target of $25 is based on 12x our 2008 EPADS estimate.

Anindya Barman contributed to the report.

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