STOCKWATCH: PCCW shares lower on continued concerns over results/outlook/C&W
2001-03-31
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Pacific Century CyberWorks Ltd shares were lower in
midmorning trade, with selling pressure continuing on a variety of concerns
ranging from its 2000 results to the overhang of Cable & Wireless PLC's
possible disposal of shares in the company, analysts said.
They said the lack of concrete information given by PCCW on its future
plans for growth has heightened concerns that the company will not see any
growth in revenue in the short to medium term.
Investors will continue to sell down the stock unless the company draws up
immediate plans to sell off assets, cut its debts and restructure its new
businesses, dealers said.
At 11:35 am, PCCW was down 0.175 hkd or 5.38 pct at 3.075 on volume of 39.
04 mln shares. It earlier hit a low of 3.05 hkd.
The Hang Seng index was up 87.54 points at 12,765.43.
Dealers said the stock was still suffering from the impact of the very larg
e 2000 net loss reported on Wednesday.
"Retailers are selling because of the results. After seeing the headline
numbers, they are just dumping the shares," an analyst with a local brokerage
said.
He said fund managers are also selling the stock after becoming more or
less convinced that there are no growth prospects for PCCW in the near term.
Despite briefings by PCCW management on Wednesday and Thursday, analysts
are still unsure how the company plans to turn around its new businesses.
"The company itself has not been saying much. This indicates that they
themselves do not know what to do," he said.
In yesterday's analyst briefing, all the heads of units were present but
the manner in which they handled the questions indicated that there was no
clear division of responsibility in terms of the operations they handled, he
said.
"There was a lot of overlapping and unit heads answering questions for
other units," he said, adding that the answers they did give were not
convincing.
"If they had something to tell us, they would have. That is why they did
not really have that much to say," he said.
PCCW will unveil its plans for its Network of the World (NOW) broadband
content operations within 90 days, which indicates that the company is still
grappling with how to handle NOW, the analyst said.
ra/jw
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At 11:51 am, PCCW was down 0.15 at 3.10 on 40.986 mln shares.
The Hang Seng index was up 83.25 points at 12,761.14.
The local brokerage analyst said PCCW must have obtained approval from the
stock exchange before deciding to write off against reserves the 22 bln usd in
goodwill related to its acquisition of Cable & Wireless HKT last year.
"PCCW initially must have thought that writing off the goodwill from
reserves was a pure accounting treatment.
"However press reports in the last two days have been emphasising the
negative equity and headline numbers," leading retail investors to sell down
the stock, he said.
He said analysts are more concerned about the repayment of principal on
PCCW's re-financing debt, which starts in 2003.
"We are concerned about its future prospects, debt reduction, interest
expense payments... among others."
He said PCCW will have to pay more than 3 bln hkd a year in the next two
years in interest expense.
Even the traditional businesses of HKT are "not at all exciting," he said.
"If it was exciting and there were growth prospects, they would definitely
tell us about it .... there is nothing to tell here," he said.
"In addition, all the company's major business units are facing
competition. IDD tariffs are down considerably.
"Although its wholesale international broadband bandwidth has increased,
overall market supply has also grown and tariffs have fallen by more than 40
pct last year."
He said even if the wholesale volume offsets any tariff falls, at most one
should see flat growth with almost no upside coming from this unit.
"The local fixed line network is holding its ground but there will be
further deregulation in mid-2003 and how is the network going to hold up?"
Concerns over Cable & Wireless' 15 pct stake in the company will continue
to lend volatility to the stock, the analyst said.
C&W is currently allowed to sell a stake of 7.5 pct, and will be allowed to
dispose of the remaining 7.5 pct from August this year.
"If C&W sees what we see ... that there is no further upside (in PCCW
shares), then they would consider selling now and getting cash rather than
waiting," he said.
Although the analyst puts a 3.50 hkd fair value on PCCW shares, he said
with no upside on the stock, "what is the point of buying the shares?"
He is calling a trading sell on PCCW as "the stock doesn't deserve a buy
recommendation."
"The near-term driver will be if they sell more assets and reduce debts,"
he said.
There is market speculation that the company is in talks to sell its office
tower in Quarry Bay for 2 bln hkd, the analyst said.
"They need the cash to resolve their debt problems and they should be
moving to CyberPort in a few years when it is ready anyway," he said.
ra/jw
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