Goldman Sachs: Pacific Century CyberWorks MARKET PERFORMER target price HK$2.825
11/05/01
Pacific Century CyberWorks (0008) - MARKET PERFORMER
Source from Goldman Sachs
Summary
On May 10, CLP Holdings formed a joint venture with Yes TV to provide pay-TV services to retail customers, CLP is attempting to win an FTNS license so that it can build a fiber network and fiber to the home, CLP has plans to offer voice services, but did not provide a launch date.
We believe it is too early to consider CLP a threat to PCCW given the challenges CLP faces. However, if CLP successfully executes on winning an FTNS license, building a fiber network, and offering voice services, it could potentially pose a longer-term competitive threat to PCCW. We maintain our estimates and Market Performer rating on PCCW stock.
Table 1
Year end Dec: | 2001E | 2002E | 2003E
Net profit (HK$m) | 2440 | 5436 | 10111
EPS (HK$) | 0.09 | 0.20 | 0.38
EPS change (%) | 280 | 122.22 | 90
EBITDA | 10.8 | 8.6 | 5.2 |
Yield (%) | N.A | N.A | N.A
PE (X) | 30.6 | 13.7 | 7.2
Suggested price: HK$2.825 (10/05/2001)
Highlights
Competitive in the local loop has, to date, been relatively benign. Specifically, at the end of 2000 PCCW reported it had around 94% of the local access market (after five years of competition). However, we forecast gradual market share loss to reflect the arrival of new players and new local access technologies into Hong Kong.
Over the next five years to 2006, we estimate PCCW's local market share will fall to around 86%. Over the longer term, the threat to PCCW is if CLP delivers on its plans to install its own fiber in Hong Kong apartment buildings. Fiber infrastructure into key buildings and an IP-based platform and CLP's customer¡¦s relationships could present significant competitor to PCCW. Given the milestones that CLP needs to achieve over the coming 6-12 months, it is too early for us to change out market share assumptions.
Pccw's interactive TV service generate around 1% of total revenues, and as such the financial impact of competition in this segment is relatively trivial. PCCW and i-Cable Communications (1097.HK, HK$4.55, MP) are Hong Kong's pay-TV incumbents else's network, the challenges of securing content, and uncertainty surrounding the JV's ability to provide multi channel broadcast TV (rather than the video on demand PCCW currently offers) may initially constrain subscriber growth.
infocastfn.com |
