UPDATE: Morgan Stanley Upgrades VimpelCom Ltd. to Overweight, Raises PT on Multiple Positive Factors

In a report published Wednesday, Morgan Stanley analyst Cesar Tiron upgraded the rating on VimpelCom Ltd. VIP from Equal-Weight to Overweight, and raised the price target from $12.00 to $14.50. In the report, Morgan Stanley noted, “We see 3 reasons to buy the shares: 1. We now have stronger conviction that non-operational catalysts will materialize, especially the planned refinancing of debt, and in particular the $3.6bn HY bonds – 11.75% coupon – at Wind, which we expect to trigger 8% EPS enhancement from 2014 onwards; 2. The slow recovery of VimpelCom's Russian and Ukrainian business is largely factored into consensus expectations. In Russia, network enhancement continues with 80% of BTS connected through fiber by year-end 2013; 3. At our price target, which implies 18% upside, VIP would trade on 10x 1-year forward earnings and an 12% FCF yield, a 7% and 30% discount to MTS. The possible inclusion in the Nasdaq 100, which may occur in December 2013, could be supportive for the shares as $30-35bn in passive money is tracking the index. Progress on asset sales is also possible, especially in Algeria following the award of a 3G license to Djezzy on October 14th, 2013. Our VIP PT increases by 20% from $12 to $14.5 driven equally by i) moving our target EV/EBITDA multiples for VIP segments from 2014e to 2015e and ii) rolling out net debt used for valuation from $29bn by 2013YE to $27bn by 2014YE.” VimpelCom Ltd. closed on Tuesday at $12.37.