Byron Capital’s Goff says Cogeco remains a Buy

Byron Capital analyst Rob Goff thinks Cogeco’s integration of Atlantic Broadband will be critical. He says he would like to see the company’s “exceptional domestic execution” leveraged into the US, but expects investors will be wary after the failed experiment that was the company’s Portuguese division, CabovisaoOn Friday, Cogeco Cable (TSX:CCA) completed the acquisition of US cable systems provider Atlantic Broadband from ABRY Partners.

Atlantic Broadband, which serves more than a quarter million cable customers in Pennsylvania, southern Florida, Maryland, Delaware and South Carolina is the 12th largest operator in the United States.

Cogeco CEO Louis Audet talked about the company’s first foray south of the border:

“This is a very important day for Cogeco Cable as this acquisition marks our entry into the U.S. market. There are sizable opportunities for growth, including increasing the penetration of the small- and mid-sized business segment and maximizing the bundling potential of services in the residential sector. I am very pleased to confirm that Ed Holleran, one of Atlantic Broadband’s founders, will continue to lead our U.S. operations team as CEO. I would also like to welcome all Atlantic Broadband employees to the extended Cogeco family.”

Byron Capital analyst Rob Goff thinks the integration of Atlantic Broadband will be critical. He says he would like to see the company’s “exceptional domestic execution” leveraged into the US, but expects investors will be wary after the failed experiment that was the company’s Portuguese division, Cabovisao. Still, says Goff, Cogeco trades at a discount to its peers, and the Byron analyst says he remains bullish on the company from a risk-adjusted return perspective. In a research update to clients this morning Goff reiterated his BUY rating and $45 target on Cogeco.

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Founded in 1957, Quebec-based Cogeco is Canada’s fourth largest cable systems operator. The company, which also owns local community TV and adult contemporary radio assets, has grown its revenue from $746.9-million in 2006 to nearly $1.3-billion in fiscal 2012, which it reported November 1st.

Goff says one area of acquisition activity he has a favourable view of is the data services space. He says he is bullish on the economics of the managed services and connectivity and expects to see continued double-digit market growth there, noting that management is targeting 10% organic growth in the coming year.

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