EUR 300.00 For Business Accounts Only

Sonaecom: Back to attractive levels

Although Sonaecom (SNC) shares were broadly flat in 2018, the company had, in our view, a quite positive year. Firstly its most important asset, NOS (NOS PL, Eur 5.99, BUY, FV Eur 6.90), had another solid year, with group EBITDA and FCFE growing 2.8% and 40%, respectively, resulting in 75% growth in 2016-2018 DPS. 2018 was also marked by the increased visibility of some of SNC’s ‘hidden jewels’, namely Armilar funds through the partial monetization of the gains achieved in one of these funds. We update our numbers and we increase our FV from €2.0 to €3.0, benefiting from the rise in NOS’ share price and a valuation increase of SNC’s stakes in Armilar funds, leading us to upgrade the shares from Neutral to BUY. Our FV incorporates a 25% holding/liquidity discount and, even so, at current levels investors are only paying for SNC’s cash position and its stake in NOS (valued at market prices). In other words investors are ‘getting’ a free optionality on SNC’s operating businesses and more importantly, its stakes in Armilar funds that hold interests in one ‘unicorn’ company, Outsystems, and a potential ‘unicorn’ Feedzai.