Nomura upgrades Vodafone, says break-up possible amid Liberty speculation

Vodafone shares continued to advance on Thursday on speculation about a possible tie-up with Liberty Global, with Nomura providing an extra boost by lifting its stance on the stock from 'reduce' to 'neutral'.The broker hiked its target price from 185p to 235p, saying it sees a potential break-up of the UK telecoms titan - something which Liberty chairman John Malone has suggested should happen in order to strike a deal."Vodafone's slow standalone progress and potential need to extend its investment phase and reset its dividend should give its board cause to consider alternative routes for value creation," Nomura said.While the group has openly dismissed any notion of a split, the broker said that the barriers to a restructuring are "not [...] insurmountable".Applying a 50% probability of a break-up has taken Nomura's target price to 285p, with Vodafone's assets worth between an estimated 270p and 300p."Vodafone has openly coveted Liberty Global's assets, but the valuation gap between the two companies remains too wide for Vodafone to bridge through paying an equity-based deal premium," Nomura said."Following Malone confirming his interest in an asset combination, we think the market will now contemplate Liberty Global taking the senior role in deal scenarios. Vodafone's strategic risk discount switches to a strategic premium, which is material for valuation."Vodafone was trading 0.8% higher at 240.75p by 10:37.