BT Group PLC (LSE:BT.A) is seen as a ‘buy’ as Patrick Drahi’s standstill agreement is about to end and the company’s management seeks to show a strong front.
Berenberg, in a new note, repeated the European bank’s rating following a pair of recent conversations with CFO Simon Lowth and Openreach CEO Clive Selley.
“We have known both men for many years, and last week’s meetings were among the most upbeat that we have had with them,” Berenberg analyst Carl Murdock-Smith said in a note.
“A sceptic might suggest that such positivity is simply a sensible defence strategy in the face of 12.1% shareholder Patrick Drahi’s standstill agreement coming to an end after 10 December.
“Whether that is the case or not, BT’s organic story is undoubtedly strengthening, and it is now set to report revenue, EBITDA, adjusted EPS and normalised FCF growth in 2022/23 (by 1%, 4%, 9% and 22% respectively), set against an undemanding valuation of 9x P/E.”A detailed note delves into key talking points around the Covid recovery, the potential impacts of omicron, the roll-out and growth of OpenReach, and the telecom group’s view that its people are the competitive advantage.
On the subject of Drahi, the Berenberg’s Murdock-Smith added: “We asked how much time Mr Selley has spent with 12.1% BT shareholder Patrick Drahi. He responded by saying that he has met Mr Drahi numerous times in numerous countries over the years.
“As part of Openreach’s research into “best practice” for its fibre rollout, Openreach visited lots of other operators, including Mr Drahi’s operations in Portugal and France. Mr Selley said that he learned from Mr Drahi’s companies about building methods, network architecture and labour arrangements.”
Billionaire Patrick Drahi’s Altice, which has a 12% stake in BT, will be free to bid for the UK telco after the end of the moratorium on December 10.
Berenberg's 'buy' comes with a 200p price target, versus a current price of around 172p.
ast week, Credit Suisse repeated an ‘outperform’ rating for BT but it doesn’t expect and fireworks as the Drahi the moratorium is lifted.
It flagged that Altice was already free to make smaller stake increases and there have been no statements suggesting Altice wants to make a bid for BT.
“The more important point in our view is whether Altice’s presence might accelerate further shareholder-friendly steps; for example, on cash returns or strategy,” the Swiss Bank added.