TPSA Rallies as UniCredit Upgrades Phone Company: Warsaw Mover

Telekomunikacja Polska SA, Poland’s largest phone company, gained most in more than a month after UniCredit SpA recommended buying its shares, saying a recent selloff was overdone.

The stock rose as much as 3.9 percent and closed 2.1 percent higher at 7.3 zloty in Warsaw, the biggest advance since July 10. UniCredit upgraded the Polish unit of Orange SA to buy from hold and increased its price estimate 11 percent to 8.13 zloty.

TPSA shares have plunged 40 percent this year, making it the worst-performing stock in Warsaw’s benchmark WIG20 Index, as falling mobile phone rates, rising competition and economic slowdown hurt earnings and prompted management to reduce a dividend 67 percent to 0.5 zloty a share. Second-quarter profit declined 70 percent to 76 million zloty ($24 million) while earnings before interest, tax, depreciation and amortization fell 23 percent to 1 billion zloty, the company said last month.

“The recent shares selloff has come just as TPSA has regained its capex flexibility, supporting dividends at a minimum current level of 0.5 zloty per share,” Przemyslaw Sawala-Uryasz, an analyst at UniCredit in Warsaw, said in a note today. “Organic free cash flows support dividend upside to at least 0.6 zloty per share, with a safety buffer sufficient for an upgrade over the next two years.”

Standard & Poor’s this month cut TPSA rating by one level to BBB, the second-lowest investment grade, citing shrinking profit and a “meaningful” drop in free cash flows this year.

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