October 6 (SeeNews) - Austria's Raiffeisen Centrobank (RCB) said on Tuesday it has downgraded its "buy" recommendation on Croatian company telecommunications equipment maker Ericsson Nikola Tesla to “hold”.
“Our fears of decreasing investments of telecom operators on export markets appeared to be more than realistic, and the situation on the domestic market is not much better,” RCB said in a statement.
“However, this shortage should be restored later in the upturn. For 2009 we expect the dividend to remain stable, which is a plus in the current market situation. Additionally, we expect the share to profit from positive momentum on the market,” the statement added.
Based on the first half or the year figures, RCB does not expect Ericsson Nikola Tesla to achieve our previous estimates for 2009, hence major changes in RCB's planning model refer to 2009 and 2010.
“The outlook for the following years remains roughly the same, with the regional market as key growth driver, due to low broadband penetration rates. We have lowered our expectations regarding EBITDA [earnings before interest, tax, depreciation and amortisation] margins in 2009 and 2010 considerably, as a consequence of high fixed operating expenses, mainly staff costs,” it added.
RCB also said that due to significant deviations in performance in 2010 and 2011 and partially negative results of the majority of peer group companies, it assigned 100% weight to the DCF [discounted cash flow] valuation and derived a 12m cum dividend price target of 1,535 Croatian kuna ($311/211euro), which implies low upside potential.
The company’s shares closed at 1.485 kuna on Tuesday, 0.68% up from its previous close.
(1 euro = 7.2597 Croatian kuna)