In a report published Thursday, Morgan Stanley analyst Gary Yu reiterated an Overweight rating on 21Vianet Group (NASDAQ: VNET), but removed the $35.00 price target.
In the report, Morgan Stanley noted, “We retain our Overweight on VNET after the company announced the acquisition of a ~50% stake in Sichuan Aipu Network (Aipu) for ~Rmb700 mn (US$110 mn). We estimate that the transaction will be 5% dilutive to 2014e normalized EPS due to higher finance costs. Management expects VNET will be among the first batch of non-SOE companies to be granted a broadband license. In addition to upside from offering cross-connect service, such a license could help VNET reduce bandwidth costs.
"Management believes the extension of its data transmission network into regional last-mile access networks could lead to further bandwidth cost savings for the integrated network.”
21Vianet Group closed on Wednesday at $24.70.
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