Share Price Drivers

Deutsche Bank have advised clients they have adjusted their forecasts on the Vodafone Group stock owing to the firms new share count.

Vodafone Group plc (LON:VOD) shares are trading softer to the tune of 2.08 pct having reached 247.05 by mid-morning on Tuesday.

The stock is finding little favour in the current environment within which investors are attempting to establish a new valuation of the stock owing to recent corporate actions.

VOD has announced the final details associated with the distribution of proceeds post the VZW deal.



In addition to the distribution of VZW shares announced last week (0.026 VZ shares for every VOD share), shareholders will receive $0.49 cash for every VOD share, with total cash distribution $23.886bn.

Following this, with the consolidation of shares to 6 new shares per 11 previous shares VOD will comprise 26.438bn new ordinary shares plus 2.374bn treasury shares.

Deutsch Bank adjust forecasts

Commenting on the new structure, Deutsche Bank analyst David-A Wright says:

"Having originally forecast a 1 for 2 share consolidation, we now adjust forecasts to reflect the new share count. The impact on EPS is predictably dilutive, FY15E -15.9%. We also adjust valuation to account for the new share count, but combine this with a roll forward to FY15 from previous March 2014 TP.

"This comprises an unwind of various discount rates, thus TP remains broadly unchanged at 255p from 258p previously. All operational forecasts to EBITDA remain unchanged."

Further, Wright believes Vodafone warrants a premium and he maintains his Buy call on the stock:

"We continue to rate VOD buy with the rump now trading at 6.3x headline 2014E EBITDA, however this includes £600m cost associated with project spring and c. £3bn incremental capex. Normalising for these would imply a multiple of 5.8x (and c. 8% free cash flow yield), in-line with the telco sector average."