Spark New Zealand's (NZE:SPK, ASX:SPK) share price has underperformed since mid-May relative to the NZX50 index, creating a more compelling entry point at the current level, Jarden said in a Wednesday note.
The investment firm said there is only a small prospect of growth in dividends unless the company makes a meaningful reduction to capital expenditure or boosts its overall earnings, which could prove difficult due to legacy pressures in the business.
Jarden continues to be constructive on Spark New Zealand's mobile services, but also noted the company is highly reliant on the continuation of benign regulatory and competitive dynamics.
"We reiterate our view that a key potential positive catalyst lies in SPK's willingness to simplify away from non-core businesses (IT) where we see potential value upside if SPK can reduce capital intensity while giving up little in the way of cash earnings," the equity research firm said.
It raised the rating on Spark New Zealand to overweight from neutral, noting that a sufficient value gap has re-emerged, with an unchanged target price of NZ$2.27.
The company's Australia and New Zealand shares both advanced around 5% in recent Thursday trade.