Deutsche Bank
Markets Research
Asia
Pan-Asia
Telecommunications
Periodical
Asia-Pac Telecom
Tracker
Date
8 September 2017
Ending the affair
Sector underperformance leaves it at extreme levels
________________________________________________________________________________________________________________
Deutsche Bank AG/Hong Kong
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.
Peter Milliken, CFA
Research Analyst
(+852 )2203 6190
peter.milliken@db
Top picks
China Mobile (0941.HK),HKD82.35 Buy
SoftBank (9984.T),8,520 Buy
Telstra Corporation (TLS.AX),AUD3.72 Buy
HK Telecom Trust (6823.HK),HKD9.84 Buy
SK Telecom (017670.KS),KRW251,500.00 Buy
Source: Deutsche Bank
After a year of chasing growth, we now prefer market leaders in mature
markets. Many offer substantial real dividend and FCF yields, and these large,
integrated operators are generally well positioned for cloud and IoT led growth,
which we expect the market to gradually become aware of, driving multiple
expansion. We think it is hard to go past Telstra, China Mobile, HKT, SK
Telecom and Singtel at this stage (and also Idea), and have skewed our model
portfolio in the direction of such firms, adding Telstra and HKT.
Good things starting to happen
Telcos have retreated 3% in the last 3M, giving up the prior quarterˉs gain, and
confirming the sectorˉs narrow trading range. However Asia-ex Japan
generated 2% EBITDA growth, the second best in eight quarters, and
coinciding with a notable management shift YTD in ID, PH, TW and TH from
competition towards profitability. However, in the last three months sector EPS
forecasts for 2017 have generally been trimmed. We expect the profitability
focus to prevail. We sense a drive to lift profitability and FCF, and note that
even in HK, which has got more competitive, HKT was talking of °green
shoots±. While AU, IN, KR and SG have issues, we doubt the reality will reflect
the degree of punishment that many of their stocks have endured. We also see
efforts to lift value in general, as reflected by China Mobileˉs special dividend,
China Unicomˉs mixed ownership, and Hutchison selling its fixed line unit.
(Please see our July 12 FITT,
M&A Spike heralds the Value-added era
, for
more).
Turning 180 degrees ¨C the risk now is ignoring value, we think
High yield had its run after the GFC through to around 2015 ¨C so after that long
rally, should be expected to lag until the next downturn. However, Mr. Market
always asks difficult questions,
。。。以上简介无排版格式，详细内容请下载查看