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BROOKER TELECOM DAILY PCCW (8.HK) ST BUY HK$7.65 (HSI 14,681) So the deal is on! Price Target – HK$8.50 · In the new revised deal, Telstra has the last laugh with a lower price (in all 13% lower than original) and for more. · In terms of future earnings, the most disturbing aspect is that the majority stake in the Mobile business. Though still priced at the high end, US$2900 the future earnings of any telecommunications company will be derived from the Mobile business (from applications like WAP etc.). Thus PCCW will have only a small stake in the leading telecommunication business and its profits. · Interestingly Telstra’s reason for expansion is to get out of their domestic market that has dwindling margins into a market will an even higher saturation rate, stiffer competition and massive expenditure (3G) – nice move. · In the IP JV, the difference is US$250mln from the original deal. But the real implications are that PCCW will reduce its debt by only US$375mln instead of the proposed US$1.125bln. · The Convertible Bonds change was as expected with the strike price floating over 45 day average and the amount down 50% to US$750mln. What hasn’t been noted is the increase in interest rate of 2% across the period and that should PCCW default then Telstra receives PCCW’s half of the IP JV! · What is the most important factor arising after the deal? PCCW’s cash flow. Now that the US$9bln debt has been reduced to really US$6.2bln (Mobile $1.68bln, CB $0.75bln + IP JV $0.375), what are the interest payments? On conservative basis the debt could be as much as HK$3bln a year (though we expect creative financing to reduce the formal figure) and also a HK$5bln on NOW rollout that does not leave PCCW with much considering HKT’s historic cash flow is usually around HK$10bln, and also remembering PCCW also needs to finance the Cyberport. Thus with such debt implications we see PCCW as still fundamentally weak with the main concern being the cash flow. However, in the short term we expect a strong bounce on the fact that there is a deal after the market factoring in a lot of uncertainty, which, will also be boosted by today’s market surge. We do however emphasize the short-term aspect. James Loh +852 2801 7323 / info@t8research.com |
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| aus der Diskussion: | PCCW-News, Berichte & Stories 42.KW in Deutsch/Englisch |
| Autor (Datum des Eintrages): | Kersken (16.10.00 16:35:33) |
| Beitrag: | 18 von 67 (ID:2089324) |
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