RCOM Trading Buy Target 120

RCOM Trading Buy Target 120

Ø The debt-laden company Reliance Communications due to high leverage, regulatory overhang continued to witnessed selling pressure in recent time.

Ø The stock has shown a good bounce back from a recent 52Week Low of INR 60 retracing 34% with giving break out above INR 90 Signalling a buy on our SYSTEMS, indicating the stock has potential to retrace 50% of the fall from its recent peak of 188.50 which was in October and can go up to INR 120.We Feel the worst is over for the stock. Current open interest in the stock is 30.9mn shares; near to its 52 week high.

Ø To also give a fundamental rational behind the break out is the big events which have unfolded like refinancing for redemption of outstanding FCCBs of USD 1.18 Billion through ICBC EXIM and CBD which have shown confidence in management’s ability. Point to note is that this is Largest refinancing in history of FCCBs by any Indian Corporate.

Ø Company is also looking to raise about $1.5 billion through an initial public offering in one of its undersea cable unit in Singapore. Company continously working on various options to unlock value from its unique combination of global telecom assets for the benefit of its shareholders

Ø In a recent TRAI’s report suggest that RCom have done well in rural areas, data subscribers continue to increase and non voice revenues have also gone up more sharply for CDMA players compared to GSM players.

Ø Company is also in process of deploying higher speed EV-DO (Evolution-Data Optimized) Rev-B phase-II and this should accelerate data revenue growth in future. Over all The Telecom Industry have begun gaining traction in 3G,and voice traffic has rebounded in 3Q. (EVDO is a telecommunications standard for the wireless transmission of data through radio signals, typically for broadband Internet access.)

Ø We also like BHARTI in telecom space and have a Trading buy with a target of 375 on the stock.