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NOS: Attractive from all angles

NOS shares have underperformed the local index by 12% since mid-December. In our view the absence of price hikes in convergent bundles at the start of the year might have contributed to some concerns about the competitive environment. We find such fears unfounded as we see no deterioration in the competitive dynamics. Even if we were to assume no price increases in convergent bundles over the next 5 years and with it the implied EBITDA mg dilution, our valuation would still reach €6.2 per share, a comfortable 27% upside. We have cut our revenue/EBITDA numbers slightly to incorporate the delay in price increases for 2018E, but the valuation roll over partially offsets it, leading our FV to nudge down from €7.1 to €6.9 and thus we reiterate our SILVER BULLET BUY recommendation. Results on March 12th might be an opportunity to dispel any doubts once and for all about NOS’ solid operating momentum and confirm expectations for a big jump in dividends. We expect 48% YoY growth for 2017E DPS to €0.30, a move we also believe will help to remove pressure on the shares.