William Blair & Co. has initiated coverage of Cellcom Israel Ltd. (NYSE:CEL) with a "Market Perform" rating. Cellcom is a subsidiary of IDB Holding Corp. Ltd. (TASE:IDBH) through Discount Investment Corporation (TASE: DISI).
"Cellcom is the leading Israeli provider of cellular communications services in a relatively stable market environment characterized by evenly distributed market share among the top three players," says William Blair. "The company’s strong management team, with significant prior experience, has reinvigorated growth and improved profitability. Growth opportunities include increasing penetration of data services toward peer levels leveraging its recently launched 3G network."
William Blair also sounds a note of caution as to the company's future. "The largest near-term risk seems to be an increase in regulatory rhetoric aimed at reducing mobile rates," it adds. "Uncertainty of more regulation or introduction of new competition could limit near-term stock performance and keep overall returns in line with the market despite the healthy dividend yield."
William Blair expects Cellcom's earnings per share for 2007 to grow by 11.9% to NIS 5.93, with revenue likely to increase by 7.6% to NIS 6.05 billion. "Cellcom has an attractive dividend payout policy of at least 75% of net income. Its declared near-7% annualized dividend yield is well ahead of peers," it concludes.
Published by Globes [online], Israel business news - www.globes.co.il - on April 25, 2007
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