Broker snap: finnCap unimpressed by C&W

17th Nov 2009 12:40

The proposed demerger announced Tuesday morning by Cable & Wireless (C&W) is unlikely to unlock value from the telecoms company, according to broker finnCap.'C&W have announced demerger details which seem to hold no surprises, and will presumably intend to play on the "unlocking value" stories which surround demergers like an alchemical fog. We suspect the opposite,' finnCap avows. The broker thinks that C&W International (C&WI), the legacy of C&W's old colonial telephone business in Panama, the Caribbean, Macau and Monaco & Islands, will remain a viable investment for income investors, as the businesses are expected to continue to pump out cash.In contrast, the UK focused Worldwide business (C&WW) is expected to face a tough challenge from a reinvigorated BT Global division 'and even a new player (KCOM, reselling BT's products and aiming further up towards C&WW's target customer base),' the broker reckons.'If you want the 9.5p dividend (6.9%, top end but within consensus) then take it, but be aware of significant risk to the capital,' finnCap warns.The broker's recommendation for income investors to bank the dividend and the two shares offered, but to ditch the C&WW share at the earliest possible opportunity.'C&WI will remain a cash cow, fighting to generate efficiencies and cash in its incumbent markets, but remaining a yield play,' the broker concludes.