Canaccord Genuity lowers target price on Zegona Communications

Canaccord Genuity said following 2021's successful Euskaltel stake disposal and return of proceeds to shareholders, Zegona's recent annual results led it to upgrade its forecasts. In its results, management guided to an annual opex/loss run-rate of roughly €3.0m, 10% below last year, to fund listing expenses and salaries of the team.

The Canadian bank also said Zegona's "highly experienced investment team" was continuing to screen the European telecom landscape for the next "fixer-upper" M&A deal, with outlook commentary suggesting that both the supply of M&A targets and the telecom debt funding environment had improved in recent months.

"At 54.0p the stock trades at a ~33% discount to our risk-adjusted end-2023 book value forecast of 80.0p. We are conscious of the low trading liquidity of the shares and operating losses until a new deal is consummated, but continue to see upside optionality ahead of a potential deal-related equity raise. Our new 80.0p target (down from 130.0p) implies close to 50% upside," said Canaccord, which stood by its 'buy' rating on the stock.

Reporting by Iain Gilbert at Sharecast.com