Telemig Celular Undervalued

We are keeping our Buy recommendation on Telemig Celular (TMB).

Despite the weak economic conditions throughout the world, we believe that the stock remains attractively priced and as such the growth trend of the company remains positive in the short term. TMB posted as expected results for the third quarter of 2008 with sound cash flow and higher net income. We remain particularly encouraged by Vivo Participacoes (VIV - Analyst Report) acquisition of Telemig and its solid balance sheet.

We believe Telemig’s valuation will converge with that of Vivo in the upcoming quarters. In the medium term, Telemig will be incorporated into Vivo, creating considerable synergies. Presently, the stock trades around 7.4x its 2008 revised earnings estimates, well below the industry mean and median.

It also trades at 1.9x its enterprise value (EV)/2008 estimated EBITDA, also below other Brazilian wireless companies like Vivo (VIV) and TIM Participações (TSU - Snapshot Report). Our target price is US$75.00, which is based on an EV/2008 estimated EBITDA multiple around 3x, closer to the valuation of Vivo and to the industry median.

Read the full analyst report on TMB

Read the full analyst report on VIV

Read the full analyst report on TSU

Email	Print	Share	RSS	Rate Pos	Rate Neg	Comment