Pick up Eircom while it's down

Dolmen Butler Briscoe is advising investors to buy Eircom at current weak levels and suggests that a secondary offering is likely…

Dolmen Butler Briscoe is advising investors to buy Eircom at current weak levels and suggests that a secondary offering is likely to be offered at very attractive levels.

In its latest report, the brokers say Eircom has performed well from an operational perspective and the secondary placing represents a good medium-term bet for investors. "We believe this will represent a good medium-term buying opportunity as Eircom will undoubtedly be involved in the secondary round of European consolidation, as it is inconceivable that it will continue to operate as an independent operator in a global marketplace," according to analyst Mr Cedric Cruess Callaghan.

If there is an opportunity for retail investors to participate in a secondary offering, it will probably be at a 5 per cent discount to the institutional offering, which itself may be at a 10 per cent discount to the market place, he adds. "While the flotation price last July was clearly overvalued compared to the sector average, any secondary offering is now likely to be at a 30 per cent discount to the sector average. We believe this will represent a good medium-term opportunity," according to the brokers.