Monday shares report: Vodafone moves into the ‘quad’ market with Kabel Deutschland buy

24th June 2013

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Vodafone confirmed today it was moving into consumer broadband and television following the announcement that it is buying Germany’s main cable firm Kabel Deutschland in a deal worth some £6.6bn writes Philip Scott.

In the deal the FTSE 100 listed telecommunications giant is offering shareholders 87 euros per share in cash. The board of Kabel board said it would now recommend the offer to shareholders.

Vodadone has already faced a potential bidding war with Liberty Global after it made its own rival offer.

The move brings Vodafone that step closer to moving into the so-called ‘quad’ market providing broadband, telephone, mobile as well as television. The market has reacted favourably with Vodfone’s shares up 0.05p in mid-morning trading.

Keith Bowman, equities analyst at Hargreaves Lansdown Stockbrokers says: “The market has given the deal a tentative thumbs-up. The shares are still favoured and with a dividend yield at circa 5.5%, this is very attractive for income seeking investors in a low interest rate environment.”

Share data website Digital Look has the broker consensus at a ‘strong buy’ for the telecommunications stock. Both the likes of UBS and Citigroup also list the stock as ‘buy’.

In other shares to watch this week, Sheridan Admans, investment research manager at stockbrokers The Share Centre points to support and equipment supplier to the oil industry, Petrofac, which delivers a trading update to the market tomorrow. The firm’s share price has been fairly weak since the beginning of the year, losing 24% in six months, partly due to several profit warnings in the sector. Brokers including Nomura, Citigroup and UBS all have Petrofac labelled as a ‘buy’.

Admans says: “Investors will want to hear of any further contract wins, especially from the Middle East where the company has struggled with major wins lately. An update on operations in Amenas, Algeria, will be of interest and investors will want to know whether it is about to restart following the terrorist incident earlier this year. The order backlog provides somewhat of a safety net for next year’s earnings; however investors will want to see the record order backlog extended.”

Bowman points out that despite the firm’s troubles, the consensus rates it as a ‘buy’, adding: “It has had its problems and challenges. It is also quite reliant of course on the state and health of the oil industry.”

Troubled travel and leisure group Carnival, down some 8% over the past six months, also delivers a market update and investors will be keen to see how a number of cancelled tours due to the engine fire aboard the Triumph in February have hit earnings.

Bowman says: “While the consensus is a ‘strong hold’ it has suffered a lot of operational setbacks. Investors will be keen to know how it will deal with such issues going forward.”

Latest recommendations from Investec Securities and Deutsche have the group as a ‘buy’ though Panmure Gordon has the stock labelled a ‘sell’.

Admans says: “Carnival has been plagued by incidents over the last few years, including sinkings, fires and robberies, coupled with tough global economic conditions which have led to the group offering cabins at low prices. Investors will be looking for a confidence boost from these results.” The Share Centre rates Carnival as a ‘hold’.

A trading update from Standard Chartered is keenly awaited this Wednesday. The bank’s share price is down 12% over the past six months. Admans says: “The share price has been under pressure since March on the back of growing concerns and volatility in emerging markets. Its last update the group highlighted pressure on margins, along with rising costs and bad debts. Investors will be hoping that recent weakness in the markets has not dented confidence further.”

Digital Look has the stock via broker recommendations as a ‘buy’. Deutsche, has it listed as a ‘hold’ while Citigroup rates it as a ‘buy’. Bowman says: “Its first quarter trading update was a little disappointing but the consensus is a ‘strong hold’ but its exposure to emerging markets has caused concern, especially the impact of slowing growth in China and the withdrawal of quantitative easing by the US.”

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