For a couple of reasons, the sale of some of the assets Rogers Communications (Rogers Communications Stock Quote, Chart, News: TSX:RCI.B, NYSE:RCI) consider non-core would not be a huge boon to its share price, Canaccord Genuity analyst Aravinda Galappatthige thinks.
As reported by Bloomberg Tuesday, Rogers CFO Tony Staffieri spoke at the UBS Global Media and Communications conference in New York earlier this week and said the company is considering selling some assets, including the Toronto Blue Jays, MLSE and Cogeco.
“There were some strategic benefits that we had hoped for with Cogeco and those seem to be further and further away,” Staffieri said of Cogeco.. “As we think about an environment where interest rates start to go up and compare it to the yield that we’re getting on the asset today, we think there’s probably better use for that capital.”
Bloomberg reports that Rogers could net as much as much as $2.2-billion from the sale, but the Canaccord analyst says investors hoping for a huge run in the stock as a result may be disappointed.
Galappatthige says some of the potential upside is already baked into the stock, and some would be eaten up by taxation.
“How much is factored into the stock price?” Galappatthige, asked aloud in an update to clients Wednesday. “While we believe there may be some representation of these non-core assets in the stock, it is unlikely to be anything close to $4B. Hence, we do expect some additional upside to the stock if progress is made along the asset sale route, potentially more than half of the $7.77/sh we referred to earlier. However, we highlight that while asset sales are being considered at a high level, we do not believe there any imminent deals in place at this time.”
In a research update to clients Wednesday, Galappatthige maintained his “Buy” rating and one-year price target of $71.00 on Rogers Communications. Shares of the company were up 0.2 per cent to $66.09 at press time.