Market Wrap: China Mobile and PCCW Control the Day
Aug 16, 2001 - 19:50:17 HKT
QuamResearch
Today's market was dominated by two stories -- both of them involving telecoms. First was a rumor that a major PRC telecom, rumored to be China Telecom, would buy a stake in PCCW. This was later denied by PCCW. The second, and far more important, was the results announcement of China Mobile. The numbers disappointed investors, and the share was heavily sold down.
On market turnover of HK$7.382 billion, the HSI dove 309.19 points or 2.55% to 11,832.44.
Mobile contributed 230 points to the fall, followed by Unicom in distant second at 41 points. SHKP cost another 15 points, and HSBC 8 points.
Properties:
Properties fell 1.6%. Cheung Kong (1) dropped 75 cents to $70.25, Henderson (12) fell $1.00 to $34.70, and SHK (16) dropped $1.75 to $64.50.
Adding to the minor mystery surrounding this Monday's land auction, Victor Li, vice chairman of Cheung Kong, confirmed that the lady who raised her hand to bid the Hung Hom commercial site for Sino China is a manager from Cheung Kong. Li also said she hasn't reported for work in the past two days. Li also has continued to refuse to clarify the relationship of CK to Sino China.
Asked if Cheung Kong would make more clarifications when it announces its interim results next week, Li said it is "not bloody likely" (actually, he just said it was "unlikely," but our version has more flavor).
Banks / Financials:
HSBC (5) and Hang Seng Bank (11) both lost 25 cents to $93.75 and $88 respectively. BEA (23) rose 15 cents to $18.
Wing Lung (96) lost another 1.5%, 50 cents, to $32.50 following its disappointing earnings release yesterday.
Liu Chong Hing Bank (1111) declined 10 cents, 1.2%, to $8.50. In the afternoon, the bank announced that is interim profit fell 13.9% to $202.3 million. Net interest income fell 11.5% to $413.75 million, and provisions for bad and doubtful debts declined 30% to $51.297 million.
Comm. & Industrial:
PCCW (8) gained 7 cents, 3.65%, to $1.99 on rumors that a major Chinese telecom was going to take up a stake. Two telecom names were thrown about -- China Telecom and China Mobile. The stock rose as high as $2.15 during the day, a 12% spike over yesterday's close, before falling not quite all the way back down to earth as the rumors dissipated. Mobile said it has not had any discussions with PCCW about a possible business cooperation, and PCCW denied the rumor that China Telecom would increase its stake in PCCW.
China Mobile (941) dropped $3.40 or 9.8% to $31.40, just up off its day low of $31.20. Unicom (762) followed suit with a 90-cent fall, 7.35%, to $11.35.
Mobile announced its first half results during lunch. Profit rose 58.4% to Rmb 13.81 billion on a 69% increase in revenue to Rmb 48.9 billion yuan. Broker expectations ranged from Rmb 13 billion to Rmb 16.9 billion net profit. More significantly, ARPU dropped precipitously. APRU was Rmb 158, down from Rmb 221 at the end of last year. The large percentage revenue and profit increases were due to the November acquisitions of networks in 7 provinces and cities (Beijing, Tianjin, Shanghai; Liaoning, Hebei, Shandong, and Guangxi).
In Mobile's annual results announcement in April, the company provided some figures that are more useful: pro-forma. We should have a better look at them tomorrow as they should be updated. On a pro-forma basis (assuming the current structure was in effect for the full year), Mobile earned Rmb 12.66 billion in the first half of 2000 and Rmb 24.7 billion for the full year, implying second half pro-forma profit of just Rmb 12.04 billion. Therefore, Mobile's pro-forma YoY growth is just 9.1%, while the growth compared to the second half of 2000 was 14.7%.
Mobile said it had 58.9 million subscribers as of the end of June, representing a market share of 74.7% in the provinces it operates, down from 77.5% at the end of last year. The number of minutes of use (MOU) per user was 249 minutes, down from 299 minutes last year. Pre-paid users doubled from the end of December to the end of June, from 12.7 million to 25.8 million. Pre-paid users have lower ARPU at Rmb 78 (down from Rmb 87 last year), compared to the contract subscribers' ARPU of Rmb 204 (down from Rmb 241 last year). However, contract MOU was not significantly changed: 329 minutes, down from 326 minutes.
The results will be discussed tomorrow, but after an initial glance at the figures, we will repeat what we said back in April (the stock was trading at $32.40 at that point): ARPU is continuing to decline, revenues are appearing to slow, the company is having to invest aggressively, and looking two years out Mobile will be faced with massive depreciation charges. Pass. |
