BUY NOKIA FH – Calling for Growth – Blue Sky upside +100%, short/medium-term upside +25%

*While a bit of a ‘hated’ company with a historic of earnings disappointments we believe the new management will be able to turn the company back into a winner with its 5G focus – competing against Huawei who has been hit with political opposition in its expansion

*5G is one of the largest infrastructure projects ever and is estimated to be crucial earnings component for these companies for the next 5 years  with Europe investing EUR 500bn+, China USD 400bn by 2023 the US just below USD 300bn over the next 7 years

*Greensill report estimates 5g relative technologies will reach USD 2.7 trillion by the end of 2020

*New management team focusing on margins, costs reduction and diversification – Management could also sell part of its profitable segments to focus more on growth and margins – all factors crucial for recovery  

*Reduction in cost base will bring NOKIA a fighting chance against Ericson with its close to 20% market share in 5G and Huawei with cover 40%

*Patent lawsuit against Lenovo could result in royality payments by the end of the year which could add 5% to EBITDA a quarter – Trial set for 3-7

May with a final decision set for 10 December

*While on a DCF basis the company still looks fairly valued we think the opportunity is within the growth segment as the new management is opening new doors

*Speculation has in the past been about potential LBO for the company

*The main issue for the company remains how long it will take for margins to recover under the new management

*ANR current shows 18 Buys, 13 Holds and 2 Sells with an average price target around the current price

*CMD scheduled for 18 March and results set for 4^th Feb – both potential catalysts