Welcome Back, Charter: MSO Returns to NASDAQ

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Miller Tabak media analyst David Joyce
was one of the first cable analysts to initiate coverage on Charter
Communications’ return to the NASDAQ market last
week, slapping a $48, 12-month price target on the stock
and describing the cable provider as a candidate for system
swaps or sales.

Charter was re-listed on Sept. 14 after an 18-month hiatus.
It was delisted shortly after it filed for bankruptcy
protection in March 2009. Charter emerged from bankruptcy
in November and has traded over the counter since

It returned strongly, opening at $38, about $3 above its
last over-the-counter price. It leveled off in later trading,
closing at $34.75 on Sept. 15.

Joyce said Charter is likely to sell or swap at least some
systems in the future. Publicly, the company has said it
continues to look at a combination of buying, selling and
swapping systems to improve operational efficiencies.

Other analysts — Tom Eagan at Collins Stewart, Russ
Solomon at Moody’s Investors Service and Matt Harrigan
at Wunderlich Securities — have said before they expect
Charter to rationalize at least some systems. And Morgan Stanley analyst Ben Swinburne initiated coverage on Charter in June with a $38 price target.
appears to be one of the first to have assigned a value to Charter’s
individual system clusters, based on prices paid in recent
deals like Cablevision’s $1.4 billion purchase of Bresnan
Communications, RCN’s $1.3 billion acquisition by ABRY
Partners, Knology’s acquisition of Sunflower Broadband
and others.

According to Joyce, Charter’s Alabama and Georgia
cluster (with 609,100 customers) and its Michigan cluster
(with 592,100 subscribers) have the highest average
enterprise value of $2.2 billion each. North Carolina/
South Carolina/Virginia (516,400 customers) and Louisiana/
Tennessee (533,400 subscribers) are a close second
at $1.9 billion.

Joyce said in a research note his firm expects Charter
to be active in the industry’s cable-system rationalization.