Vodafone Group PLC (LSE:VOD) is "substantially undervalued", said a leading investment bank following reports the group is exploring strategic options for Vodacom, its African business.
The UK-listed telco has ruled out a sale of the unit, though rumours are swirling that it may merge it with another operator in the region such as Etisalat.
Vodafone is also thought to be looking to divest other assets to realise value, or at selling a stake in the company.
“If confirmed, this indicates that Vodafone management is willing to consider radical options for the company, which we view as substantially undervalued, in part due to complexity, EM [emerging markets] exposure in a rising rates environment, an under-appreciation of cable infrastructure value and pessimism over future growth-capital intensity prospects,” said Deutsche Bank in a note to clients.
Deutsche rates stock in the telecoms group ‘buy’ with a 195p price target.
Of the 20 banks and brokerages logged as following Vodafone, 10 are positive on shares in the company.
The consensus price target is 122p, a 20% premium to the current stock market valuation.