We wrote about Brasil Telecom's ADRs (BTM-NYSE) back in October, and our thesis is that BTM is an undervalued telecom player in Brazil where Management is working to unlock hidden value by simplifying its corporate structure. Today's press release from the company announcing the shareholder's meeting to vote on the reorganization simply confirms that our thesis is playing out.
To refresh your memory, each Brasil Telecom ADR represents 3 shares of BRTO4 (BRT04-BOVESPA), one of the many public listings of Brasil Telecom S.A. (Oi. S.A.), the second largest telecom group in Brazil with approximately 25% market share of the Brazilian market.
Oi has always been known to have a convoluted corporate structure, leading to its shares trading at a significant discount to its peers (it trades at just 3.5x EV/EBITDA vs. global peers between 4.0x - 7.0x). The management team recognizes this problem and has decided to simplify the ownership structure of Oi by consolidating into 2 public listings (BRTO3 and BRTO4 and the NYSE-listed ADRs).
What is especially interesting about BTM is that prior to the reorganization, each shareholder of BRTO4 and BRTO3 (and by extension the ADR holders) will receive a special dividend equal to R$2.54 (or ~$4.20 per ADR). Combined with modest multiple expansion from a simplified corporate structure, it is not unreasonable to expect each ADR to be worth north of $30 per share over the medium term, with a near-term $4.20 dividend kicker.
- The Aspiring Analyst
No comments:
Post a Comment