TD Securities analyst Vince Valentini is pounding the table on Quebecor Inc., telling clients not one other stock within the Canadian telecom space provides the same combination of value and growth.
He believes the seven-per-cent pullback in Quebecor shares since the company reported first-quarter results is “completely unwarranted.”
The company’s initial phase wireless business had record average revenue per user (ARPU) development of 15 per cent, revenue development of 45 percent, net subscriber additions up 61 percent, and EBITDA at an all-time high of $13 million.
As Quebecor’s wireless business matures, Valentini expects it\’ll attract more investor attention, which can only stay positive for the stock. The analyst also noted that the market appears to be applying little or no value towards the company’s wireless division to date.
He anticipates Quebecor will have much better EBITDA and free income per share growth than its Canadian telecom peers, partly due to growth in wireless along with the positioning of its Videotron cable unit in Quebec.
Videotron?has industry-leading customer service numbers, bundling capabilities with four product offerings, along with a video business which has already made the shift into the pick-and-pay channel packaging that Canadian television customers are clamouring for.
Despite all that, Quebecor shares trade at just 5.6x estimated EBITDA for 2015, while United states cable stocks trade between 6.3x and 9.7x.
Valentini estimates the market is currently applying a 25-per-cent holding company discount to Quebecor shares. However with its non-core asset sales previously 18 months, the analyst noted that the company’s core cable and wireless assets in Quebec now represent 96 percent of his gross asset value, “therefore we seriously question why such a large holdco discount is justified.”
TD rates Quebecor shares an action list buy with a price target of $42.