Evening Wrap: Light Day Ahead of Futures -- After Market PCCW Explosion of Red Sets Scene for Thursday
Mar 28, 2001 - 19:53:26 HKT
QuamResearch
The market was quiet today in anticipation of tomorrow's double witching -- futures expiry and PCCW results. There could be some selling tomorrow. Today, however, traders bid the HSI up 143.51 points to 12,851.41 on thin turnover of HK$6.88 billion. Just to put that turnover in context, that's almost (but not quite) the same amount that Richard Li's little company lost in 2000.
Properties
Properties were mixed. Cheung Kong (1) gained 75 cents to $79.50, Henderson (12) gained $0.50 to $39.50, and SHK (16) rose $0.75 to $73.50. Wheelock, which saw strong gains yesterday following Wharf's (4) positive numbers coming out, fell back nearly 4% on profit taking to end the day down 30 cents to $7.25. Wharf, in the C&I sub-index, declined just 10 cents, 0.5%, to $21.
Banks / Financials
Financial counters saw a little strengthening today. HSBC (5) rose $1.50 to $92, Hang Seng Bank (11) gained $0.25 to $91, and Dao Heng (223) rose $0.10 to $35.80. BEA (23) declined 10 cents to $17.85. Among the non sub-index stocks, Manulife (945) added back $1 or half a percent to $191, Wing Lung (96) gained 10 cents to $33.50, Citic Ka Wah (183) gained 2.50 cents to $2.20, and ICBC (349) gained 20 cents to $6.85. Wing Hang (302), IBA (636), and LCH (1111) were all flat. HKCB (655) fell 5 cents to $2.20.
Commercial & Industrial
China Mobile (941) gained $1.10 to $35.10 while tiny rival Unicom (762) fell 5 cents to $8.55 to a new closing low, having fallen as far as $8.45 during trade. Strangely enough, one might want to start looking at Unicom, though we have not changed our stance that it is still at a premium and still a risky share. The parent company has outlined plans for quickly building a nationwide CDMA network. The company is putting out for tender some US$2.4 billion worth of contracts, according to the Asian WSJ. Locally-listed Unicom has "no equity stake or risk in the CDMA venture, but will have the option of buying it later." The apparent aim of the CDMA network is to immediately develop capacity for 13.3 million subscribers and push that up to capacity for 50 million within a few years. However, the huge capex is still the bugbear for Unicom and the large China Mobile. Sooner or later, expenses -- and mistakes, if applicable -- have to show up in the financials.
PCCW Results:
Local billionaire-child-and-college-dropout-turned Internet entrepreneur Richard Li led his army of suits, though he himself was shockingly tie-less, to present the annual results of PCCW (8) after the market closed today.
PCCW closed down 2.5 cents to $3.475, having dropped as low as $3.30 during the day, as some punters perhaps thought the surprise up Mr. Li's sleeves would be a good one, but they will be disappointed. Despite eloquent confidence over their expectation of "high single digit revenue growth" next year, it was last year's numbers that garnered attention. The company posted a consolidated net loss of US$886 million or HK$6.893 billion versus a modest interim net loss of HK$34.9 million (with the aid of paper profits) six months ago. Of course, the large disparity between the first and the second half was due to consolidation of PCCW and HKT's numbers and how to deal with excess goodwill. Nevertheless, PCCW's internet investments helped dip that pen in red ink. It can't all be blamed on the HKT merger.
PCCW's results will be analyzed tomorrow. The key elements to watch will be the Internet write-offs, its negative shareholder equity, and its lingering debt burden as well as the questionable state of HKT. Note also the company's talk of EBITDA. It's a nice figure -- makes the company look successful. The proforma consolidated EBITDA for 2000, however, was US$790 million (HK$6.15 billion) versus HK$11.6 billion for HKT alone in 1999/2000. Things are still slipping.
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