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Quebecor’s headquarters in Montreal.Robert J. Galbraith/The Globe and Mail

Quebecor Inc.

Wednesday's close: $44.20, up 1 cent, or 0.02 per cent

52-week trading range: $32.30 to $47.50 a share

Annual dividend: 20 cents for a yield of 0.45 per cent

Analysts' ratings: There were 15 buys, no holds and no sells, according to Bloomberg data. Target prices ranged from $46 a share as estimated by Veritas Investment Research analyst Neeraj Monga to $58 a share by TD Securities analyst Vince Valentini.

Recent history: The B shares of the media and telecommunications company have rung up an 18-per-cent gain (including dividends) over the past year. Its stock has been climbing after falling to a 52-week low last October amid some investor concern that it might have to raise money by issuing equity to raise its stake in its Quebecor Media operating company. Instead, it raised $850-million by issuing debt to help finance the purchase of shares from the Caisse de dépôt et placement du Québec to boost its interest to 75 per cent. Quebecor Media includes the Vidéotron telecom division, Sun newspaper chain and the TVA French-language television network. Its Sun Media unit has been challenged by declining advertising revenue, while its Vidéotron division, which includes its cable and wireless businesses, has become the main profit driver. When Quebecor released first-quarter results last week, Vidéotron's young wireless business passed the break-even point for the first time since it was launched two years ago. Pierre Karl Peladeau also resigned as Quebecor's chief executive officer to hand over the reins to Robert Dépatie, who has been CEO of Vidéotron.

Manager insight: Quebecor is on the road to transforming into a telecom dividend play as cash flow grows from its Vidéotron division, and the company continues to reduce debt, says Andy Nasr, a portfolio manager with Middlefield Capital Corp. "I expect Quebecor to demonstrate the best earning per share and cash flow growth in the telco sector during the next two years."

The company has spent over $1.2-billion to build a wireless network, and the market has been watching to see when it would gain the critical mass to turn profitable, said Mr. Nasr, who has been acquiring Quebecor shares over the past month for his portfolios. "It was marginally profitable in the first quarter...So, it is just a sign to the market that any wireless subscriber additions will add more profit to the bottom line because they are covering their costs."

Because Vidéotron has a dominant market share in the cable business, it can cross sell its wireless services to existing customers, he said. "That is really the nice part of the story...once they have the proper product in place." It is expected that it will be able to upgrade its spectrum in the upcoming auction this year so Vidéotron will be able to offer the more popular mobile devices like the popular iPhone, he said. "That is what is going to drive that big increase in cash flow."

With the new CEO for Quebecor coming from Vidéotron, it is a signal that the company is moving way from mergers and acquisitions to focus on "harvesting cash flow" that will likely be used for dividends, share buybacks and the purchase of the remaining 25 per cent of Quebecor Media that is still owned by the Caisse, Mr. Nasr added. The struggling news media division, he noted, represents less than 5 per cent of Quebecor's net asset value.

He expects Quebecor stock can reach $55 a share within a year. The stock could eventually climb to $70 a share if it increases its dividend significantly, and also reduces its debt, he said. "This is a name that is not well followed because it is a Quebec company and relatively small. When you talk about telcos, you usually talk about Rogers, Telus and Shaw. But Quebecor is generating the vast majority of its business from Vidéotron, the telecom business, and that is pretty significant."