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Europe Stock Writeups |
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Vimpelcom has had a great run over the past two years; however at the current price valuations have become stretched, forcing a sale. Vimpelcom (ADR) is the smaller of the two main listed Russian mobile telcos. In Russia overall, mobile penetration is set to double from 25% to 50% in 2004, with average revenue per user buoyed by the networking effect. Vimpelcom also has exposure to growth in other CIS countries, specifically in Kazakhstan (the 2nd richest CIS country in terms of GDP per capita, but only 7th in terms of mobile penetration). Vimpelcom has a PE to growth of only 0.2X, and is generating free cash flow despite the heavy capital expenditure programme. Earnings are set to increase by 78% in 2004.
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Vivendi has been massively restructured since the departure of the previous, controversial, management. Since 2000, the debt of €25bn has been reduced to €6.3bn. Vivendi is generating healthy cashflows from its mobile telecommunication companies. Further to this, the company owns considerable content through its stake in NBC Universal, and a distribution company in France, Canal Plus. The company's games and music businesses are just returning to profit. An improvement here could lead to upside to our 10.7% free cash flow yield forecast in 2006.
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Yara International. Norway's ninth company by market cap. and the world's largest (nitrogen-based) fertiliser company. Second quarter earnings soared 44% on the back of very strong demand, especially from Brazil, and significantly higher grain prices. The growth rate may slow from here, but should still remain high; meanwhile it is also expanding through acquisitions - the most recent being a Finnish fertiliser company. A very simple play on the change in the grain cycle fuelled by Asia's demand for more and better food.
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