PCW - Pacific Century CyberWorks Limited Message Board

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Technology Stocks : PCW - Pacific Century CyberWorks Limited

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To: ms.smartest.person who wrote (1615)	7/12/2001 1:57:45 PM
From: ms.smartest.person	of 2248

Goldman Sachs: Pacific Century (0008) - MARKET PERFORMER - Suggested price: HK$2.42 5/7/01 Source from Goldman Sachs Summary We maintain our Market Performer rating on Pacific Century CyberWorks (PCCW) stock after the company announced its Internet strategy on July 4th. We believe the fundamental and valuation implications of the announcement are neutral, since PCCW has not dramatically revised its guidance for EBITDA losses for the unit over the next three years (2001-2003). The expected 2001 EBITDA loss of US$190 mn is slightly higher than our estimate of US$172 mn, while the total for 2002-2003 of US$100 mn is lower than our estimate of US$130 mn. There was nothing in the announcement that was a surprise either fundamentally or strategically. We have reduced our B2C EBITDA loss in 2002 20% and 2003 40%, which raises PCCW Group EBITDA in 2002 1.8% to HK$8.5 bn and 2003 EBITDA 0.7% to HK$13.2 bn. Net profit estimates have also increased by 2.6% in 2002 and 1% in 2003. We believe three minor positives stand out in the announcement: (1) refocused efforts on operating the Internet access and iTV business in Hong Kong, as opposed to aggressively expanding regionally; (2) rationalizing redundant infrastructure and staff, the first step in this process was the retrenchment of 340 employees on July 4 generating annual savings of US$16 mn; and (3) reduced capex for the Internet services unit in 2001 by 50% to US$10mn. The impact of these initiatives could be reduced fixed and variable costs and reduce the losses of the unit, with an aim to achieving break even by December 2003. PCCW announced it had received credit ratings of BBB and Baa1 from Standard & Poor¡¦s and Moody¡¦s, respectively, clearing the way for a possible bond issue. PCCW provided guidance on July 4 for EBITDA losses at its consumer Internet business for the next three years. In 2001 PCCW expects to limit EBITDA losses to US$190 mn (versus our estimate of US$172 mn), for 2002 and 2003 PCCW has committed to limit EBITDA losses to US$100 mn over the two years. The latter number is slightly lower than our forecast of US$130 mn. As such, we have reduced our 2002-2003 B2C EBITDA losses. PCCW indicated it would not book any significant one-time restructuring charges as a result of the retrenchments. Table 1 Year end Dec 2001E 2002E 2003E Net profit (HK$ mn) 2,445 5,572 10,208 EPS (HK$) 0.09 0.21 0.38 EPS change (%) 280.00 133.33 80.95 Ent. Value/EBITDA 10.1 8.0 4.7 P/E (X) 26.9 11.5 6.4 Div. Yield (%) - - - Suggested price: HK$2.42 (05/07/01) Infocast Ltd. Email: support@infocast.com.hk © Copyright 1998-2000 by Infocast Ltd. All Rights Reserved. infocastfn.com

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