Wunderlich Starts Lilac Group At Buy: '!Libertad Sin Contrato!'

In a report published Friday, Wunderlich analyst Matthew Harrigan initiated coverage of

with a Buy rating and a price target of $56. LiLAC Group is

tracking stock for its high growth character operations in Latin America and the Caribbean. "LiLAC Group's tracking stock character happily affords it continued latitude to benefit from Liberty Global's product roadmap and even its balance sheet power in the event of major M&A," analyst Matthew Harrigan wrote. Although the Chilean government has recently reduced its GDP growth estimate for 2015 from 3.6 percent to 2.5 percent, Harrigan believes that many Chilean consumers "have the wherewithal to upgrade to new products such as LILA's Horizon video product when it is introduced later this year." Dataxis has forecasted an improvement in pay-TV penetration in Chile to 79 percent in 2017, from 69 percent in 2015, with broadband penetration improving to 59 percent from 51 percent. "Chile also benefits from mobile and B2B upside," Harrigan said. Referring to Puerto Rico, Wunderlich noted in the report, "LiLAC Group now owns the virtual entirety of the cable business on the island, with its recent 60%-owned Choice acquisition concluded at a compelling 6x pro forma OCF multiple. There is ample latitude to move Choice's broadband-centric business model to include more video and voice." In the longer term, LiLAC should be poised to become "a significant player" across "select small and mid-sized markets," while it is unlikely to enter markets with "unacceptable political risk like Argentina and Venezuela," Harrigan added.