Broker snap: MS turns bullish on BT

16th Jun 2009 11:38

Long time BT sceptic Morgan Stanley has joined the BT fan club now that the worst seems to be over at the telecommunications giant's troubled Global Services division.The US bank has upgraded its rating of the shares from 'equal weight' to 'overweight' and lifted its price target from 130p to 140p on expectations of improved cash flow, driven by the company's cost cutting plans.'With management now focused on cash generation we think free cash flow could rise from £1.15bn in 2010 to £1.5bn in 2013, and long-term it could be £1.9bn or higher,' Morgan Stanley (MS) states.'The dividend could therefore grow strongly again from its re-based level - a reasonable near-term trading level could be a 6% yield of a likely 2010 estimated dividend of 7.0p,' MS reckons. 'If free cash flow were to stabilise at our 2014 estimated level, the sustainable dividend could double and the share price rise to 190p at an 8% dividend yield,' the US investment bank calculates. It is the first time in four years that Morgan Stanley has had an 'overweight' rating on BT.