Goldman Cuts 2001-02 EBITDA Estimates on PCCW by 8%
Jul 17, 2001 - 15:01:14 HKT
Quamnet News Service
Goldman Sachs said it has reduced its estimates on Pacific Century CyberWorks' (0008) EBITDA (including associates) by 8 percent in both 2001 and 2002, meaning that PCCW's estimated 2001 EBITDA multiple rises to 10.8 times from 10.0 times.
In a note to clients today, Goldman analyst Radek Barnert said the reduction was a result of its 23 percent and 27 percent cut in respectively its 2001 and 2002 EBITDA estimates for Reach to US$498 million and US$522 million. The cut followed Telstra, the other partner of the joint venture, issued specific guidance for Reach's 2001 EBITDA provided on a conference call held for investors on July 13.
Goldman's DCF-based SOTP and multiples-based SOTP valuations are now HK$5.07 and HK$3.20, respectively, it said.
"We have revised down our estimates for 2001 and 2002 revenues to US$1.8 billion and US$1.9 billion, respectively (down 9 percent and 11 percent from our previous estimates). We have made these changes by reducing the average tariffs for international voice calls and by reducing our estimates for IP backbone revenues generated in 2001 and 2002. We have also revised down our EBITDA margin assumptions for Reach to 31 percent for both 2001 and 2002 (compared with 36 percent and 37 percent previously). We believe a reduction in Reach's EBITDA margin is likely to occur in 2001 due to pricing pressure in international voice revenues and the impact of consolidating the HKTI and Telstra International businesses," said Barnert.
Goldman said the impact on its estimates for PCCW has been significant at the net profit line due to the lower associate contribution from Reach. As such, its 2001, 2002 and 2003 estimates have fallen 15 percent, 12 percent and 10 percent, respectively, to HK$2.1 billion, HK$4.9 billion and HK$9.2 billion. As a result of its revised assumptions for Reach, its revenue forecasts for PCCW have also fallen -- it is reducing its estimates in 2001, 2002 and 2003 by 1.6 percent, 1.9 percent and 2.2 percent, respectively. The impact on PCCW's core EBITDA has been a reduction of about 2 percent in each of the three years, the US house said.
Still, Goldman is maintaining its Market Performer rating on the stock.
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