NEW YORK (TheStreet) -- Shares of VimpelCom (VIP) shares are up 2.96% to $4.17 in early market trading on Monday after Norwegian telecom group Telenor (TELNY) announced it is selling its $2.3 billion stake in the Russian telecom company.
The proposed sale comes amid an investigation against VimpelCom for bribery stemming from its activities in Uzbekistan.
Telenor's position in VimpelCom represents a 33% stake in the company.
"The VimpelCom asset, where Telenor holds a minority position without the possibility to fully control the company, has been challenging," said Telenor chairman Svein Aaser.
"The disposal of our shares is in the best interest of our shareholders, and in accordance with Telenor's long-term strategic focus," Aaser said
Telenor has held a stake in VimpelCom for more than 16 years, according to the Financial Times,
TheStreet Ratings team rates VIMPELCOM LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate VIMPELCOM LTD (VIP) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 3.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, VIP maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
- Net operating cash flow has decreased to $801.00 million or 27.31% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- VIP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.34%, which is also worse than the performance of the S&P 500 Index. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, VIMPELCOM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- The revenue fell significantly faster than the industry average of 10.8%. Since the same quarter one year prior, revenues fell by 25.8%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- You can view the full analysis from the report here: VIP