U.S. Markets open in 5 hrs 37 mins

UPDATE: Morgan Stanley Reiterates On 21Vianet Group Following Acquisition Announcement

Dwight Einhorn

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.

Related Links

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.