Zacks senior Latin American markets analyst Caudio Freitas, CFA maintains his Buy rating on the shares of Brazilian telecom company Vivo Participações S.A. (VIV). Here we bring you some of the reasons behind his favorable outlook:

'We are keeping our Buy recommendation on Vivo Participações S.A. The company has a dominant position and a strong brand in the fast growing Brazilian wireless business. Third quarter operating results were positive, and the short-term outlook remains encouraging.

'Meanwhile, the improvement in the Brazilian economic environment will eventually lead to Brazil being upgraded to investment grade within the next twelve months. Finally, the acquisition of Telemig (TMB) coupled with the new bands in all the regions where the company was not yet authorized to operate were very positive news.

'Presently, Vivo is trading at 112x our estimated 2007 earnings, and 6.9x its enterprise value to 2007 EBITDA (a more common valuation metric for the wireless industry). The very high P/E is a result of the low expected net income, since the company has been recovering from a difficult period. In this case, we believe it is better to analyze the EV/EBITDA ratio.

'We understand the current valuation of VIV is attractive if compared to Tim Participações (TSU), its biggest competitor in the Brazilian market. Moreover, if we analyze the price/sales ratio the stock also seems to be highly undervalued. Particularly encouraging has been the continued improved results. We believe in the near future the stock will trade around 8x its enterprise value (EV)/2007 estimated EBITDA, closer to the valuation of Telecom Italia (TI). Our six-month target price is US$6.50.'