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Freenet Slumps as Deutsche Bank Sees Rally End: Frankfurt Mover

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April 23 (Bloomberg) -- Freenet AG, a German provider of phone and Internet services, fell the most in almost a year after Deutsche Bank AG analysts downgraded the stock because further gains would depend on acquisitions or a higher dividend.

The stock, which has rallied more than 40 percent over the past year, is unlikely to move higher as the company probably won’t grow without takeovers this year and is unlikely to further increase shareholder payout, Deutsche Bank analysts Benjamin Kohnke and Uwe Schupp said in a note to clients late yesterday, in which they reduced their rating to Hold from Buy.

Freenet, based in the northern German town of Buedelsdorf, fell as much as 4.8 percent to 17.71 euros, the biggest intraday slump since May 16. The shares were down 2.9 percent as of 10:32 a.m. in Frankfurt on volume that was 76 percent of the daily average for the last three months. Deutsche Bank raised its share-price estimate to 18 euros from 17 euros.

“While we believe that visibility on operations as well as on dividends remains good for the full year 2013, we note that valuation levels appear increasingly rich,” the analysts said. “A further re-rating would need a clear acceleration in the retail strategy or aggressive leverage to pass on more cash to shareholders. Both scenarios appear unrealistic.”

Freenet, which buys wireless capacities from network operators and uses them to offer service to clients, in December agreed to acquire Gravis, a German seller of Apple Inc. products. The company last month increased its dividend payout ratio to 66 percent after posting the highest net income in its history.

To contact the reporter on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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