Execution Noble recommends “hold” on KDG

Analysts Execution Noble have initiated coverage of Kabel Deutschland (KDG) with a “hold” recommendation based on a “fair value” of €25 a share.

The analysts said, “Whilst we are positive on cable as a technology and believe that Kabel Deutschland is likely to deliver premium growth we do not believe the valuation is sufficiently attractive to justify a Buy recommendation given the lack of visibility on several key issues. Our key concerns are the potential impact of Deutsche Telekom’s FTTH plans, that capex will remain at high levels and share overhang risk.”

Execution Noble believes that KDG is trading at a slight premium to its peers at a multiple of seven times EBITDA. It noted that Deutsche Telekom had also committed to connect up to 10% of homes to FTTH by the end of 2012.

Execution Noble has expressed a Buy preference for the UK’s Virgin Media, with a fair value of £18 (€20) a share.

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