Excellence Investments Ltd. (TASE: EXCE) is issuing a revised review today of Israeli telecommunications shares, following the launching of Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) TV and the Israel Securities Authority investigation of Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ). Excellence is reiterating its "Buy" recommendations for the Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Partner shares and its "Neutral" recommendation for the Bezeq share.
Excellence gives a NIS 41 target price for the Cellcom share, 27% higher than the market price, and a NIS 25 target price for the Partner share, 36% higher than the market price. Its target price for the Bezeq share is NIS 6.80, 16% higher than the market price.
Excellence co-head of equity research and senior analyst Roni Biron writes, "Partner's television service is another milestone in the transition of the Israeli television market from a market with two players to a market with a variety of options and prices. This change is likely to boost competition over price and market share." He believes that Internet-based platforms, such as Partner TV and Cellcom TV, are game-changers.
"We believe that the availability of smart screens and streamers, as well as the expansion of the wholesale market in Hot Telecommunication Systems Ltd.'s (TASE: HOT.B1) infrastructure and telephone services, is likely to make it easier for subscribers to switch, and renders DBS Satellite Services (1998) Ltd. (YES) and Hot vulnerable. For the cellular companies, entering the television market constitutes a difficult financial challenge, and we believe there are broader motivations for it."
Commenting on Cellcom, Biron writes, "It entered the television field relatively early, and will reach the breakeven point towards the end of the year. Its future growth rate and making a substantial profit, however, is likely to be delayed by Partner's entry in the television market. For Partner, the way to breaking even and making a profit will be even more challenging, because it is entering a more competitive market with higher content costs. Where strategy is concerned, we believe that the launch of Partner TV is part of a broader plan in the landline sector, including a gradual switch to independent infrastructure.
"We believe that the turnovers in the cellular field will be the main element in Cellcom and Partner's pricing. The companies' profit margins are scraping bottom, and we regard the current profit multiples as comfortable, with an attractive risk-benefit ratio," Biron states.
Writing about Bezeq, in view of the Securities Authority investigation, Biron believes, "Despite the drop in Bezeq's share price, we still recommend "Neutral" at this stage because the drop in profit margins, regulatory uncertainty, and the effect of the investigation are detracting from the company's value."
Published by Globes [online], Israel Business News - www.globes-online.com - on June 28, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017