This analyst just upgraded Rogers Communications to “Buy”

Desjardins Securities analyst Jerome Dubreuil says Rogers Communications’ (Rogers Communications Stock Quote, Chart, News, Analysts, Financials TSX:RCI.B) sports assets could unlock value not fully reflected in the stock.

As reported by the Globe and Mail, in a Sept. 14 update, Dubreuil upgraded Rogers to “Buy” from “Hold” and maintained his $58.00target. The average target is $58.35.

He said the upgrade reflects strong momentum in sports valuations, upcoming private market valuation updates, the expected monetization of Rogers’ sports portfolio and the de-risked Kilmer transaction.

“While the Canadian telecom backdrop remains challenging, the FCF benefits from the recent impressive capex cut and the quiet promotional activity during back-to-school season make the elevated leverage easier to accept,” Dubreuil said.

Recent sports transactions, including stakes in the Los Angeles Lakers, Atlanta Falcons and Minnesota Timberwolves, were completed at premiums to Forbes valuations. Dubreuil said those deals increase his confidence that this year’s private market valuation updates could be higher than in past years.

He said the monetization process, including the Kilmer deal, folding the Blue Jays into the structure, valuation updates and the sale of a minority stake, should create at least $5 per share of value.

Dubreuil said his thesis does not require Rogers’ discount to private market value to narrow. However, he said the growing number of sports transactions suggests liquidity for sports assets is improving.

Dubreuil said the call likely requires a relatively stable telecom market.

The analyst says his telecom pecking order is BCE, Rogers, Quebecor, Telus and Cogeco Communications. BCE remains his top pick, supported by data centre catalysts.

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