Goldman: Telstra Overpays for PCCW JVs; Rates PCCW Market Performer
Jul 27, 2001 - 15:48:53 HKT
Quamnet News Service
Goldman Sachs said it maintained its Market Performer ratings on Pacific Century CyberWorks (0008) and Australia-based Telstra Corp., its joint venture partner.
In a note to clients today, analyst Jason Billings said Telstra's July 26 presentation on its joint ventures Reach and Regional Wireless Co. was disappointing due to the lack f a clear strategy and financial or operating numbers.
"We still feel Telstra overpaid for its investments and that the joint ventures are negative in terms of being a drag on earnings growth," he said.
Billings' report said the briefing confirmed that PCCW's equity-accounted share of associates' profits is likely to be around the previously guided range of US$250 million.
PCCW's CSL, the local component of Regional Wireless, is clearly benefiting from the stable state of the Hong Kong wireless market and is unlikely to face any significant ressure on margins in 2001, it said.
Reach, on the other hand, is still in the process of determining its longer-term strategy and revealed nothing substantially new at the briefing, it added.
"The strategic plan for Reach is critical to our valuation of Reach, which relies heavily on the establishment of a successful IP backbone business, which in our earnings model makes up around 40 percent of Reach revenues by 2005 and 60 percent by 2011," it said. "It was also stated at the briefing that the IDC joint venture is to be integrated into the footprint owned by Reach, but the impact of this is relatively meaningless in our earnings model."
The house expects PCCW to post earnings per share of 8 HK cents, 18 HK cents and 34 HK cents respectively for full-year 2001 to 2003.
As for Telstra, the house estimates its EPS to be 50 Australian cents, 32 Australian cents and 34 Australian cents respectively for 2001 to 2003. |
