UPDATE: Nomura Raises PT to $40 on Virgin Media on Price Increase Plans
Nomura reiterated its Buy rating on Virgin Media (NASDAQ: VMED) and raised its price target from $39 to $40.
Nomura commented, "VMED has announced plans to raise prices by 4-10% from 1 Feb. Most notably the line rental is to increase by 7.8% to £14.99. An increase was expected post recent initiatives from competition, but this is somewhat higher than our forecast. VMED is also raising prices for its „Collections‟, which is not without risk as churn could become an issue. We have raised forecasts, but importantly have also factored in a touch lower sub growth and some downspin. VMED trades at a 2013E EV/OpFCF of 11.6x with an equity FCF yield of 10.9%, a substantial discount to its European peers at 12.9x and 7.9%, respectively. We believe the discount should narrow further. Valuation is also well underpinned by ongoing share buy-backs."
Virgin Media closed at $32.51 on Friday.
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