BCE's value proposition: widely-held stock is trading below its net asset below

Money Digest, Dec, 2000 by Chuck Chakrapani

Since the spin out of Nortel Networks, BCE has been out of favour with investors. Paying handsomely for the CTV network and Teleglobe did not help BCE's stock price either.

Yet, there are indications that BCE (TSE: BCE; Recent price: $38; www.bce.ca) is grossly undervalued. The stock is currently trading at a large discount from its net asset value.

BCE owns a broad-based collection of communication assets in Canada and abroad. Through its 80%-owned Bell Canada, it serves more than 10 million wireless customers in Ontario and Quebec. BCE's other assets include substantial interests (20% to 100%) in Aliant, Manitoba Telecom, Teleglobe, CGI Group, BCE Emergis, Bell Canada International and CTV. BCE recently announced the merger of its Internet portal Sympatico-Lycos and the CTV network with Thomson Corporation's Globe and Mail and its nine interactive Web sites. This new entity will be 70.1% owned by BCE.

This cross-media alliance provides a powerful exposure base for BCE. Now it can bundle communication services with print and online news services to customers and create attractive cross-media packages for advertisers.

BCE's revenue growth rate of around 8% is expected to continue for the next 12 months. In that period, analysts expect BCE to trade anywhere between $52 to $60. If investors recognize the undervalued status of BCE, its stock price can go up further still.

In these uncertain times, holding an undervalued and widely diversified communications company may well be one of the least risky moves an investor can make. All indications are that better times are ahead for BCE.

BCE Emergis

Symbol           BCE (TSE)

Recent Price       $38.00
Dividend            $1.20
Yield               3.00%
Book value         $30.00
Price/Book           1.3x
EPS(*)              $8.57
P/E ratio(*)          4.5
52-week low        $21.61
52-week high       $47.45

(*) Trailing 12 months