Barclays takes a fresh look at Vodafone following 'disappointing' results

Analysts at Barclays kept their 'overweight' rating on Vodafone unchanged on Thursday after taking a "fresh look" at the British telco group following its "disappointing" full-year results and dividend cut.

Barclays said it still saw "a clear value opportunity" in Vodafone, and potential near term catalysts to help unlock a discount to its 200p price target, with "hopefully no operational deterioration" in the first quarter.

The analysts also factored in Liberty Global's assets into its forecasts after Vodafone swooped in and acquired its German and Eastern European cable networks for an enterprise value of €18.4bn, and removed the group's New Zealand operations following their recent sale.

"Adding Liberty Global (Germany/CEE) adds c€1.7bn to FY21e EBITDA, c€200m to FCF, +€18.4bn to net debt, with €500m+ of synergies inside 5 years boosting FCF," said Barclays.

"Removing NZ reduces EBITDA c€300m, and net debt c€2bn. With other minor changes the net impact is to increase FY21e EBITDA +7% (€15.7bn), EPS +12% (11.0p), FCF +4% (€5.87bn) and net debt (+€16bn)."

Barclays noted that now Vodafone's dividend has been rebased, deleveraging post-March 2020 was anticipated to come in at around €2.0bn a year, facilitating the buyback of the mandatory convertible and creating potential for dividend growth from 2023.