VIEWS: 26 PAGES: 8 CATEGORY: Technology POSTED ON: 10/8/2012
U.S. time at 10:00 on the September 12th, Apple held a new conference in San Francisco Grass Art Center, the official release of its next-generation product the iPhone 5. New products, a larger screen, and also become slimmer. iPhone 5 with 4-inch retina screen, the screen resolution from 960x640 to upgrade to 1136x640, the application icon in the main screen to 5 rows. iPhone 5 will be the latest iOS mobile operating system pre-installed.
Hong Kong Company Update 13 September 2012 BUY (unchanged) SmarTone The Aura of iPhone5 LTE Share price: HKD15.78 Target price: HKD20.00 (unchanged) iPhone5 LTE only at SmarTone!? Apple announced a list of carriers that would support iPhone5 LTE. The GSM model (model A1429) would run only on 850/1800/2100MHz bands. According to the announcement, Andy POON SmarTone is the only carrier in Hong Kong that supports iPhone5 LTE. email@example.com (852) 2268 0645 Clarification by CSL and HTHK. CSL and HTHK, which also had partnership agreement with Apple, immediately announced to start selling iPhone5 in Hong Kong on Sep 21, 2012. In addition, SMT, CSL and HTHK rolled out the online iPhone5 pre-ordering marketing campaigns. HTHK management said their 1800MHz 4G network would Stock Information support iPhone5 LTE once it finished the network upgrade. We expect Description: Provides mobile services in Hong Kong and Macau the network upgrade would be completed in the next 3 months. First-mover advantage. Unlike its competitors acquired the 2600MHz Ticker: 315 HK spectrum in 2009 for LTE network development, SmarTone only Shares Issued (m): 1,037 Market Cap (USDm): 2,113 focused on developing the 1800MHz spectrum for LTE development 3-mth AvgDaily Turnover (USDm): 4.0 since 2009. It officially launched the 1800MHz 4G service on Sep 11, HSI: 20,048 2012. Therefore, it is easy to understand that the coverage and quality Free Float (%): 33.0 of SmarTone’s 1800MHz 4G network to be better than those of its Major Shareholders: % peers, who are still rushing for re-farming. SHK Property (16 HK) 66.99 The aura of Apple’s announcement. We expect the announcement of the supporting carriers by Apple may cause the iPhone users to assume SmarTone’s network to be better supporting iPhone5 LTE. We believe the SmarTone’s image of superior network quality is Key Indicators strengthened and enables SmarTone to gain iPhone users. ROE – annualised (%) 35.0 Net cash (HKDm): 1,844 NTA/shr (HKD): 3.8 Maintain BUY. We keep our earnings estimates and target price Interest cover (x): 13.4 unchanged. We estimated its ARPU growth to continue (7%/8% for FY6/13F and FY6/14F) as their new 4G data plans removed the usage and charge caps on data. In addition, their premium data user market Historical Chart focus will enable them to be less affected by the emerging price war in 23.0 the 4G mass market. Current share price is on 13x PER of our FY6/13F 21.0 19.0 estimate, with 8% dividend yield, which is relatively attractive. Catalyst: 17.0 tariff raise in the new iPhone data package. 15.0 13.0 SmarTone–Summary Earnings Table 11.0 FYE Jun (HKDm) 2011A 2012A 2013F 2014F 9.0 7.0 Revenue 6,631 9,952 11,407 13,008 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 EBITDA 2,152 2,992 3,642 4,245 Recurring Net Profit 754 1,023 1,265 1,445 PRICE PRICE REL. TO HANG SENG INDEX Recurring Basic EPS (cents) 73.0 99.2 122.7 140.2 Source: Bloomberg EPS growth (%) 164.5 35.9 23.7 14.2 DPS (cents) 73.0 99.0 123.0 140.0 PER 21.6 15.9 12.9 11.3 Performance: EV/EBITDA (x) 7.3 5.1 4.0 3.4 52-week High/Low HKD18.50/HKD9.80 Div Yield (%) 4.6 6.3 7.8 8.9 P/BV(x) 5.7 5.3 4.5 4.3 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) (5.0) 7.0 (7.3) 1.2 17.6 Net Gearing (%) Netcash Netcash Netcash Netcash Relative (%) (5.0) 1.6 (1.3) (4.3) 8.7 ROE (%) 26.3 32.9 35.0 37.6 ROA (%) 10.4 13.7 14.7 15.1 Consensus Net Profit (HKDm) 1,140 1,281 Source: Company data, Kim Eng Securities SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS SmarTone Telecommunications Holdings Limited Figure 1: Announcement of the Supporting Carriers by Apple Source: Company data Kim Eng Securities Figure 2: Spectrums of the HK telcos Source: Company, Kim Eng Securities 13 September2012 Page 2 of 8 SmarTone Telecommunications Holdings Limited Figure 3: iPhone5 Pre-ordering Marketing Campaigns Source: Company data Kim Eng Securities Figure 4: Peers’ valuations Fiscal Market Last PER Dividend yield % year cap Px FY6/ FY6/ FY6/ FY6/ Company name end (HKDb) (HKD) 13F 14F 13F 14F SmarTone* 315 HK June 16.4 15.78 12.9 11.3 7.8 8.9 FY12F FY13F FY12F FY13F Hutchison Telecom HK 215 HK Dec 16.6 3.45 13.8 11.9 5.2 6.1 Hong Kong Trust 6823 HK Dec 44.0 6.85 25.2 22.2 6.0 6.5 Source: Company data Kim Eng Securities 13 September2012 Page 3 of 8 SmarTone Telecommunications Holdings Limited INCOME STATEMENT BALANCE SHEET FYE Jun (HKDm) 2011A 2012A 2013F 2014F FYE Jun (HKDm) 2011A 2012A 2013F 2014F Revenue 6,631 9,952 11,407 13,008 Fixed Assets 2,126 2,546 2,965 3,384 EBITDA 2,152 2,992 3,642 4,245 Other LT Assets 2,692 2,675 2,763 2,851 Depreciation & Amortisation (1,164) (1,630) (1,993) (2,375) Cash/ST Investments 1,572 1,413 1,910 2,195 Operating Profit (EBIT) 988 1,362 1,649 1,870 Other Current Assets 847 832 959 1,108 Interest (Exp)/Inc (87) (109) (100) (100) Total Assets 7,237 7,465 8,597 9,538 Associates 0 0 0 0 One-offs 0 0 0 0 ST Debt 550 0 0 0 Pre-Tax Profit 901 1,253 1,549 1,770 Other Current Liabilities 2,462 2,909 3,317 3,744 Tax (136) (212) (262) (300) LT Debt 0 66 66 66 Minority Interest (11) (18) (22) (25) Other LT Liabilities 1,317 1,320 1,537 1,820 Net Profit 754 1,023 1,265 1,445 Minority Interest 46 64 64 64 Recurring Net Profit 754 1,023 1,265 1,445 Shareholders' Equity 2,863 3,111 3,614 3,845 Total Liabilities-Capital 7,237 7,469 8,597 9,538 Revenue Growth % 67.6 50.1 14.6 14.0 EBITDA Growth (%) 82.0 39.0 21.7 16.5 Share Capital (m) 103 104 104 104 EBIT Growth (%) 201.5 37.8 21.1 13.4 Gross Debt/(Cash) 550 66 66 66 Net Profit Growth (%) 156.7 35.6 23.7 14.2 Net Debt/(Cash) (1,022) (1,347) (1,844) (2,129) Recurring Net Profit Growth (%) 156.7 35.6 23.7 14.2 Working Capital (593) (664) (448) (440) Tax Rate % 15.1 16.9 16.9 16.9 CASH FLOW RATES & RATIOS FYE Jun (HKDm) 2011A 2012A 2013F 2014F FYE Jun 2011A 2012A 2013F 2014F Profit before taxation 901 1,253 1,549 1,770 EBITDA Margin % 32.5 30.1 31.9 32.6 Depreciation 1,164 1,630 1,793 1,336 Op. Profit Margin % 14.9 13.7 14.5 14.4 Net interest receipts/(payments) 66 109 100 100 Net Profit Margin % 11.4 10.3 11.1 11.1 Working capital change 1,069 286 222 201 ROE % 26.3 32.9 35.0 37.6 Cash tax paid (15) (24) (30) (34) ROA % 10.4 13.7 14.7 15.1 Others (incl'd exceptional items) 3 338 338 334 Net Margin Ex. El % 11.4 10.3 11.1 11.1 Cash flow from operations 3,187 3,591 3,971 3,708 Dividend Cover (x) 1.0 1.0 1.0 1.0 Capex (680) (900) (1,200) (900) Interest Cover (x) 8.3 10.1 13.4 15.2 Disposal/(purchase) 14 19 25 19 Asset Turnover (x) 0.9 1.3 1.3 1.4 Others (1,918) (1,365) (1,276) (1,276) Asset/Debt (x) 1.7 1.7 1.7 1.7 Cash flow from investing (2,584) (2,245) (2,451) (2,157) Debtors Turn (days) 13.7 11.6 11.9 12.3 Debt raised/(repaid) 550 (550) 0 0 Creditors Turn (days) 64.5 50.4 45.2 45.5 Equity raised/(repaid) (125) 1 0 0 Inventory Turn (days) 34.4 24.7 20.1 20.1 Dividends (paid) (497) (750) (1,023) (1,265) Net Gearing % Net cash Net cash Net cash Net cash Interest payments 0 0 0 0 Debt/ EBITDA (x) 0.3 0.0 0.0 0.0 Others (71) 402 0 0 Debt/ Market Cap (x) 0.0 0.0 0.0 0.0 Cash flow from financing (143) (897) (1,023) (1,265) Change in cash 460 449 497 285 PER SHARE DATA FYE Jun (HKD) 2011A 2012A 2013F 2014F EPS 0.73 0.99 1.23 1.40 CFPS 3.07 3.46 3.83 3.58 BVPS 2.76 3.00 3.49 3.71 SPS 6.40 9.60 11.00 12.54 EBITDA/share 2.08 2.89 3.51 4.09 DPS 0.73 0.99 1.23 1.40 Source: Company data, Kim Eng Securities 13 September2012 Page 4 of 8 SmarTone Telecommunications Holdings Limited RESEARCH OFFICES REGIONAL ECONOMICS P K BASU Suhaimi ILIAS Regional Head, Research & Economics Chief Economist (65) 6432 1821 firstname.lastname@example.org Singapore | Malaysia WONG Chew Hann, CA (603) 2297 8682 email@example.com Acting Regional Head of Institutional Research Luz LORENZO (603) 2297 8686 firstname.lastname@example.org Economist THAM Mun Hon Philippines | Indonesia Regional Strategist (63) 2 849 8836 email@example.com (852) 2268 0630 firstname.lastname@example.org ONG Seng Yeow Regional Products & Planning (852) 2268 0644 email@example.com MALAYSIA SINGAPORE THAILAND WONG Chew Hann, CA Head of Research Stephanie WONG Head of Research Mayuree CHOWVIKRAN Head of Research (603) 2297 8686 firstname.lastname@example.org (65) 6432 1451 email@example.com (66) 2658 6300 ext 1440 firstname.lastname@example.org Strategy Strategy Strategy Construction & Infrastructure Small & Mid Caps Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Desmond CH’NG, ACA Gregory YAP Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (603) 2297 8680 email@example.com (65) 6432 1450 firstname.lastname@example.org Maria.L@maybank-ke.co.th Banking - Regional Technology & Manufacturing Consumer/ Big Caps LIAW Thong Jung Telcos - Regional (603) 2297 8688 email@example.com Wilson LIEW Andrew STOTZ Strategist Oil & Gas (65) 6432 1454 firstname.lastname@example.org (66) 2658 6300 ext 5091 Automotive Hotel & Resort Andrew@maybank-ke.co.th Shipping Property & Construction Suttatip PEERASUB ONG Chee Ting James KOH (66) 2658 6300 ext 1430 email@example.com (603) 2297 8678 firstname.lastname@example.org (65) 6432 1431 email@example.com Media Plantations Logistics Commerce Mohshin AZIZ Resources Sutthichai KUMWORACHAI (603) 2297 8692 firstname.lastname@example.org Consumer (66) 2658 6300 ext 1400 email@example.com Aviation Small & Mid Caps Energy Petrochem YEAK Chee Keong, CFA Petrochem Power (65) 6433 5730 firstname.lastname@example.org Termporn TANTIVIVAT YIN Shao Yang, CPA Healthcare (66) 2658 6300 ext 1520 email@example.com (603) 2297 8916 firstname.lastname@example.org Offshore & Marine Property Gaming – Regional Alison FOK Woraphon WIROONSRI Media (65) 6433 5745 email@example.com (66) 2658 6300 ext 1560 firstname.lastname@example.org Power Services Banking & Finance WONG Wei Sum, CFA S-chips Jaroonpan WATTANAWONG (603) 2297 8679 email@example.com Bernard CHIN (66) 2658 6300 ext 1404 firstname.lastname@example.org Property & REITs (65) 6433 5726 email@example.com Transportation LEE Yen Ling Transport (Land, Shipping & Aviation) Small cap. (603) 2297 8691 firstname.lastname@example.org ONG Kian Lin Suchot THIRAWANNARAT Building Materials (65) 6432 1470 email@example.com (66) 2658 6300 ext 1550 firstname.lastname@example.org Manufacturing REITs / Property Automotive Technology Wei Bin Construction Materials LEE Cheng Hooi Head of Retail (65) 6432 1455 email@example.com Soft commodity firstname.lastname@example.org S-chips Pongrat RATANATAVANANANDA Technicals Small & Mid Caps (66) 2658 6300 ext 1398 pongrat.R@maybank-ke.co.th INDONESIA Services/ Small Caps HONG KONG / CHINA Katarina SETIAWAN Head of Research Edward FUNG Head of Research (62) 21 2557 1125 email@example.com VIETNAM (852) 2268 0632 firstname.lastname@example.org Consumer Michael KOKALARI, CFA Head of Research Construction Strategy +84 838 38 66 47 email@example.com Ivan CHEUNG, CFA Telcos Strategy (852) 2268 0634 firstname.lastname@example.org Lucky ARIESANDI, CFA Nguyen Thi Ngan Tuyen Property (62) 21 2557 1127 email@example.com +84 844 55 58 88 x 8081 firstname.lastname@example.org Industrial Base metals Food and Beverage Ivan LI, CFA Coal Oil and Gas (852) 2268 0641 email@example.com Oil & Gas Ngo Bich Van Banking & Finance Rahmi MARINA +84 844 55 58 88 x 8084 firstname.lastname@example.org Jacqueline KO, CFA (62) 21 2557 1128 email@example.com Banking (852) 2268 0633 firstname.lastname@example.org Banking Nguyen Quang Duy Consumer Staples Multifinance +84 844 55 58 88 x 8082 email@example.com Andy POON Pandu ANUGRAH Rubber (852) 2268 0645 firstname.lastname@example.org (62) 21 2557 1137 email@example.com Dang Thi Kim Thoa Telecom & equipment Auto +84 844 55 58 88 x 8083 firstname.lastname@example.org Alex YEUNG Heavy equipment Consumer (852) 2268 0636 email@example.com Plantation Nguyen Trung Hoa Industrial Toll road +84 844 55 58 88 x 8088 firstname.lastname@example.org Adi N. WICAKSONO Steel (62) 21 2557 1130 email@example.com Sugar INDIA Generalist Macro Jigar SHAH Head of Research Anthony YUNUS (91) 22 6623 2601 firstname.lastname@example.org (62) 21 2557 1134 email@example.com Oil & Gas Cement Automobile Infrastructure Cement Property Anubhav GUPTA Arwani PRANADJAYA (91) 22 6623 2605 firstname.lastname@example.org (62) 21 2557 1129 email@example.com Metal & Mining Technicals Capital goods Property PHILIPPINES Ganesh RAM Luz LORENZO Head of Research (91) 226623 2607 firstname.lastname@example.org +63 2 849 8836 email@example.com Telecom Strategy Contractor Laura DY-LIACCO (63) 2 849 8840 firstname.lastname@example.org Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 email@example.com Consumer Media Cement Kenneth NERECINA (63) 2 849 8839 firstname.lastname@example.org Conglomerates Property Ports/ Logistics Katherine TAN (63) 2 849 8843 email@example.com Banks Construction Ramon ADVIENTO (63) 2 849 8842 firstname.lastname@example.org Mining 13 September2012 Page 5 of 8 SmarTone Telecommunications Holdings Limited APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. 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Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (“KEVS”) (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. 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Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. As of 13 September 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. 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Definition of Ratings Maybank Kim Eng Research uses the following rating system: BUY Total return is expected to be above 15% in the next 12 months HOLD Total return is expected to be between -15% to +15% in the next 12 months SELL Total return is expected to be below -15% in the next 12 months Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax 13 September2012 Page 7 of 8 SmarTone Telecommunications Holdings Limited Malaysia Singapore London New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc Bursa Malaysia Securities Berhad) 9 Temasek Boulevard 6/F, 20 St. Dunstan’s Hill 777 Third Avenue, 21st Floor 33rd Floor, Menara Maybank, #39-00 Suntec Tower 2 London EC3R 8HY, UK New York, NY 10017, U.S.A. 100 Jalan Tun Perak, Singapore 038989 50050 Kuala Lumpur Tel: (44) 20 7621 9298 Tel: (212) 688 8886 Tel: (603) 2059 1888; Tel: (65) 6336 9090 Dealers’ Tel: (44) 20 7626 2828 Fax: (212) 688 3500 Fax: (603) 2078 4194 Fax: (65) 6339 6003 Fax: (44) 20 7283 6674 Stockbroking Business: Hong Kong Indonesia India Level 8, Tower C, Dataran Maybank, Kim Eng Securities (HK) Ltd PT Kim Eng Securities Kim Eng Securities India Pvt Ltd No.1, Jalan Maarof Level 30, Plaza Bapindo 2nd Floor, The International 16, 59000 Kuala Lumpur Three Pacific Place, Citibank Tower 17th Floor Maharishi Karve Road, Tel: (603) 2297 8888 1 Queen’s Road East, Jl Jend. Sudirman Kav. 54-55 Churchgate Station, Fax: (603) 2282 5136 Hong Kong Jakarta 12190, Indonesia Mumbai City - 400 020, India Tel: (852) 2268 0800 Tel: (62) 21 2557 1188 Tel: (91).22.6623.2600 Fax: (852) 2877 0104 Fax: (62) 21 2557 1189 Fax: (91).22.6623.2604 Philippines Thailand Vietnam Saudi Arabia Maybank ATR Kim Eng Securities Maybank Kim Eng Securities In association with In association with Inc. (Thailand) Public Company Kim Eng Vietnam Securities Anfaal Capital 17/F, Tower One & Exchange Plaza Limited Company Villa 47, Tujjar Jeddah Ayala Triangle, Ayala Avenue 999/9 The Offices at Central World, 1st Floor, 255 Tran Hung Dao St. Prince Mohammed bin Abdulaziz Makati City, Philippines 1200 20th - 21st Floor, District 1 Street P.O. Box 126575 Rama 1 Road Pathumwan, Ho Chi Minh City, Vietnam Jeddah 21352 Tel: (63) 2 849 8888 Bangkok 10330, Thailand Fax: (63) 2 848 5738 Tel : (84) 838 38 66 36 Tel: (966) 2 6068686 Tel: (66) 2 658 6817 (sales) Fax : (84) 838 38 66 39 Fax: (966) 26068787 Tel: (66) 2 658 6801 (research) South Asia Sales Trading North Asia Sales Trading Connie TAN Eddie LAU email@example.com firstname.lastname@example.org Tel: (65) 6333 5775 Tel: (852) 2268 0800 US Toll Free: 1 866 406 7447 US Toll Free: 1 866 598 2267 www.maybank-ke.com | www.kimengresearch.com | www.kimeng.com.hk 13 September2012 Page 8 of 8
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