Merrill Lynch places Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR; LSE:PCCD) on its EMEA telecom and media "most preferred" stock list. The investment bank notes that Partner's dividend policy, and a predicted increase in market share and revenue, outweigh risks which are primarily macro-economic in nature.
Merrill analysts led by Stephen Pettyfer point out that Partner's position in conventional mobile services supports a strong dividend policy. They cite "the company’s strength in the post paid market, a factor which we believe will pay dividends literally in superior wireless data growth and increasing relative revenue share". Partner's current stock buy-back plan is also viewed positively. The analysts mention the company's attractive combination of 6.3% dividend yield and a committed share back of 4.5% of current market cap and add, "From a sector relative perspective, we also view the stock as a defensive name in a volatile sector."
The primary risks that Merrill sees for Partner at this point is a slowdown in economic growth - which would lower demand for mobile services and future regulatory changes. Additionally, in February, Merrill Lynch noted that Partner's switch to Ericsson as its sole equipment vendor would lead to higher depreciation in 2008 as Partner accelerates the depreciation of ex-Alcatel equipment. The higher depreciation could impact its dividend payout as the company has a policy of paying out 80% of earnings per share as dividends.
Shares in Partner were down 1.7% to $21.96 on Friday in Nasdaq trading, reflecting a market cap of $3.45 billion. On Sunday, the share rose 0.1% on the Tel Aviv Stock Exchange (TASE) to NIS 76.29.
Published by Globes [online], Israel business news - www.globes-online.com - on May 12, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008