PHI: Pacific Rim Telecom Buy

We maintain our BUY recommendation for Philippine Long Distance Telephone Co. (PHI - Snapshot Report), or PLDT.

PLDT is the country’s dominant telecommunications service provider with a leading presence in all segments of the industry. The company continues to generate substantial free cash flow enabling higher cash dividend payout and acquisitions. However, lower consumer expenditure due to the effect of the global credit crisis on the local economy could dampen growth rate in the near term.

Philippine Long Distance Telephone Company is trading at 8.7x our estimate for 2008 earnings, which represents a significant discount to most other telecom carriers in both developed countries and emerging markets. At a dividend yield of over 8%, we believe valuations would improve once normal level of confidence returns. Our $58.50 target price is based on a forward P/E of 10.7x 2009 earnings.

Read the full analyst report on PHI

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