Company: RCom
Broking House: Angel Broking
Current Price: Rs 173.80
Reliance Communications (RCom) recorded de-growth of 0.7 per cent year-on-year in its topline during Q2FY10. This is attributed to a 7.5% yoy de-growth in its wireless business segment, with a fall of 25.8 per cent yoy in revenues per minute, which stood at Rs 0.47 as on Q2FY10. Its ARPUs, MOUs and RPMs are falling at a faster rate compared to its peers despite strong subscriber additions in the wireless segment. RCom is already highly leveraged, with a substantial debt of Rs 25,466 crore and further raising of assets would weaken the balance sheet. RCom’s stock is trading at a P/E of 11.6x FY11E EPS and with the stock witnessing a sharp correction, the broking house adopts a neutral rating

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Reliance Communications Reco
Current market price:
Target price: Rs 303
Upside: 3.67%
Brokerage: Emkay Global Financial Services

The brokerage believes that the recent deals signed by Reliance Infratel (RTel) with Etisalat DB, S-Tel, Aircel, Shyam Sitema and TTSL would bring external tenancy on RTel’s towers, save costs and create value for RTel as a standalone business. With transfer of optic fiber assets from RCom to RTel, the company now not only provides passive infrastructure but also transmission and carriage services.

RTel currently has a portfolio of 50,000 towers with tenancy of 1.6 times entirely coming from captive usage by Rcom’s CDMA and GSM services. While the contract signed with Etisalat would increase the tenancy to 2.2 times, RTel aims to achieve tenancy of 3 times by FY11 on the back of contracts with other operators.

Considering the contracts signed for tower business and the incremental profit accretion from external tenants, the brokerage has increased value for the Infratel arm from Rs 25 per share earlier to Rs 78 per share now factoring in external tenancy of 1.4 times on 40,000 towers. With this, the target price for the stock has been raised to Rs 303 from Rs 225 earlier.

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BPCL   ( Bharat Petroleum Corp Ltd )

BRFL   ( Bombay Rayon Fashions Ltd )

RCOM   ( Reliance Communications Limited )

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