Morgan Stanley (MS) Stays Overweight On Tivit SA (TVIT3)

Morgan Stanley (NYSE: MS) initiated coverage on Brazilian outsourcer Tivit (NASDAQ: TVIT3) with an Overweight rating.

Morgan Stanley has put in a target price on $20 on Tivit. Tivit happens to be Brazil’s largest IT services and business process outsourcing company. Morgan Stanley said that Tivit lacks ‘true peers’ for comparative valuation, but its highly visible and long dated earnings is supportive of a DCF valuation.

Tivit trades at 5.4x 2010e EV/EBIDTA – a heavy discount on DCF valuation of 8.44x 2010e EV/EBIDTA. The analyst believes that this is not a reflection of Tivit’s secular outsourcing opportunity and strong franchise. On a long term basis, wage inflation and pricing pressure remain potential risks for the company.