Analysts Concerned About Sify In The Short Term; Price Target Revised Down

A lower-than expected topline growth and an unexpected management change at Sify Ltd have prompted analysts to revise the price target down. For instance, Sameet Sinha at Kaufman Bros has lowered the price target to $13 from $17, based on “increased near-term risk”. Sify is currently trading at $8.43.
“Our price target of $13 is based on our DCF which utilizes a 10-year forecast of the company’s estimated unlevered free cash flow discounted at the cost of equity of 13.4%, up from 11.7% previously, due to the increased risk,” Sinha wrote in a note.
However, Sinha says, “Management change is a good thing, in our view…we believe this infusion of fresh blood into the company is a good thing. Mr (Raju) Vegesna is driving strategic, operational and financial changes in the company, which will likely make it more market driven. We expect to see many changes in the company that increases execution risk in the near term, but will make it stronger in the longer term.”
The firm has revised the revenue estimates down to $122.4 million from $133.8 million for 2007 and adjusted EBITDA to $17.8 million, up from the previous estimate of $14 million. The fiscal 2008 revenue estimate is now $147.7 million, down from $168 million and adjusted EBITDA is $29.6 million, up from our previous estimate of $28 million.
This is based on Sify’s strategy of profitable growth. So the focus is on bottomline, not on the topline.

Related:
The Sify Outlook: Portals, Games, Broadband And Advertising
Sify Acquired Globe Travels For A Total Consideration Of $4 Million
Sify: The New CEO And His Priorities
Ramaraj Quits at Sify; Vegesna Becomes CEO

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