Itaú BBA has issued an update on their forecast for TIM ( TSU , quote ) "slightly" downgrading their estimate of what the Brazilian telecom carrier is worth. However, analysts reiterate their "outperform" recommendation and even this lower target represents massive upside potential.
The analysts cut their price target on TSU to BRL 12.0 from previous a previous target of BRL 12.7. They attribute this weaker outlook to the 3Q11 results, changing economic prospects, the weight of a recent equity offering and possibility of different capital expenditure numbers for the short and medium term.
Still, experts underline that either way that will not change their outperform recommendation regardless of looming investments in 4G technology. At 12 reais per share, TSU would be worth the equivalent of $32.59 per U.S. ADR -- 34% more than the current price would indicate.
About the recent acquisition of Atimus, the asset "might still have a positive impact" in TSU's top line as it is yet "not fully" considered in this valuation. Itaú BBA says they will wait for further details.
The research also remarks that local regulator Anatel's account termination rate cuts plan are in line with what was assumed, but -- having the regulator addressing the subject -- "removes a long-term concern within the sector."
Also, Itaú BBA considers that, although TSU's cash position is unleveraged, the company's suboptimal capital structure is seen as part of its investment story and has already been taken into account.
The analysts suspect that the company's low indebtedness may be a strategic decision to enable additional capital investment down the road.
By Marta Dhanis for EmergingMoney.com