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Genesis Housing
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Graduated from University of Cambridge with BA & MA in Economics. Worked in European Equities for 12 years. Previously at Credit Suisse in London in their European Equity Hedge Fund Group. Move to NYC with ING to build out European Equity platform servicing hedge funds. Left to launch a Single... More
    Sep 4, 2013 5:55 PM | about stocks: NOK

    Nokia (NOK ADRs closed up 4.5% in NYSE on 155m shares traded so meaningful volume.

    Given sell side seem to have come out with valuation targets on the pro-forma business of between E4.8 to E6, there is 20% to 50% upside on the table. Mostly these are coming from former bears who went neutral the day the acquisition was announced. It would be admirable if one or two actually came out and moved it up to a buy given the obvious price discount to where a SOTP on the remaining 3 ' clean' businesses comes out at. Knowing the way sell side analysts operate having been 50% offside yesterday, they are more likely to go neutral and remain there than making a bullish call now. I suspect one or two of the sell side analysts (probably the bullish ones!) are involved in the deal so likely won't be out banging the drum.

    Nokia will am sure now be analyzed by many institutions who were too put off by the scare stories relating the Devices &Services to even look into the investment case. Once they have done the work that they will find the stock significantly cheaper than their SOTP, hence expect a rerating to occur. This by the way is before assuming or explaining for the real value of their HERE mapping business. Sell side SOTP valuation hover around E500m as the division is barely profitable. This does not account for the fact that 90% of sales is spent on R&D as mapping is one of the most exciting growth areas in tech right now. This will take time to get through to the market.

    So as well as a 30 - 50% rerating story as the market comes back to look at the story, I also believe wholeheartedly that Microsoft is stealing Nokia at this price. This wont be the consensus view (mind you the consensus view before was that D&S was worth zero) and I am waiting to see if a shareholder hero comes out to challenge the very low price paid for the deal or if another corporate comes into the fray. This is not my base case but it is a scenario that investors can get exposure to for very little right now and something I suggest taking advantage off.

    As many of you know, these last few months I have got very involved in highlighting the undervaluation of Nokia, including in August a 45 page presentation distributed widely entitled ' 'Nokia; A significantly undervalued turnaround.' The stock at this price offers asymmetric risk reward, with almost zero downside and 30 - 50% upside without assuming MSFT forced to pay a more fair price.

    If you have not looked at Nokia and feel missed it, you have not. You just missed the first leg. Really look at it now.

    Disclosure: I am long NOK.

    Stocks: NOK
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  • Timothy Bryan
    , contributor
    Comments (984) | Send Message
    Quite well said. I am wondering when the market will see NSN plus patents plus HERE is worth at least as much as Ericsson...
    4 Sep 2013, 06:20 PM Reply Like
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