Mobile phone group boosted by hopes of a deal with Liberty GlobalLeading shares reached their highest level since the euphoria on May 8 which followed the Conservative election victory.The FTSE 100 finished up 18.25 points at 7031.72, as investors shrugged off worries about Greece running out of money before reaching agreement with its creditors. Sentiment was also helped by better than expected UK public sector deficit figures, although US markets slipped as the dollar surged on higher than expected inflation numbers, prompting new talk of interest rate rises.We think that Vodafone will have to talk to Liberty and will make some sort of announcement (in the next month or so) on whether or not it is in “exploratory talks”. We think that a merger is unlikely but that some form of commercial agreement to work together, though facing major challenges, may be the only feasible outcome other than a breakdown of talks. That would only emerge, if it does, after several months. We maintain an accumulate recommendation.We forecast fourth quarter group like for like sales growth of 3%, including 5% in the UK. This reflects continued market share gains in mobile and the broader electricals market. Management has already guided proforma headine pretax profit to be in the range of £355m-£375m. We expect this range mechanically to increase to £360m-£380m assuming that the Germany and Netherlands businesses, which we estimate made a combined loss of around £5m, are treated as discontinued. Our forecast rises from £365m to £367m, taking into account offsetting currency movements in the Nordics. Underlying momentum is strong and we forecast earnings per share growth of 16.5% in 2015. Our target price rises to 500p [from 480p]. Buy. Continue reading...
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