Cogent Communications Holdings (CCOI), mcap=$2.9bn, price $60.85 vs $56.00

CCOI pitch:
– Lowest-cost provider of fiber-only internet connectivity – direct internet access and VPN services for corporate customers, and wholesale IP transit services.
– Cogent is attractive on a standalone basis, but the pending acquisition of Sprint Wireline transforms the business.
– The transaction will be >75% accretive to standalone EBITDA and >100% accretive to standalone FCF on an operational and run-rate basis by 2028.
– Compelling risk/reward with a ~7% forward dividend yield.
– 2028 dividends are set to reach $12/share.

CCOI valuation:
– The company has a path to >$10 of FCF in 2028.
– Historically traded at 15-20x EBITDA.
– Applying 15x to 2028 EBITDA of $900m, results in the target of $200/share.

Exp. gain: +300% to $200/share by 2028.

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