发帖
雷达卡
We prefer FET over CHT and TWM after our company
visits
Taiwan
Wireless Services
Jimmy CheongAC
(852) 2800-8566
jimmy.j.cheong@jpmorgan.com
Tim Storey
(852) 2800-8563
tim.storey@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
See page 29 for analyst certification and important disclosures, including non-US analyst disclosures.
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Taiwan Telecoms: Price relative to
MSCI Taiwan
80
90
100
110
120
130
140
150
160
170
180
190
200
210
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Source: Bloomberg, J.P. Morgan estimates
• Company visits: We recently visited the Taiwan telcos for an update. Our key
conclusions are: 1) the competitive situation has remained largely unchanged
over the past 12 months and we expect a similar environment over the next 12
months. Competition remains intense but not irrational. Vibo persists with free
on-net call plans and now targets students, but they seem to be only a second
SIM provider at the moment; 2) wireless broadband data cards and netbooks are
seeing good take-up but it is still early days; and 3) we expect a stable
regulatory environment over the next 12 months with no major telecom policy
changes on the agenda of the government at this point, which helps reaffirm the
defensiveness of Taiwan telcos.
• Upgrade Far Eastone from N to OW: We think announcements regarding the
strategic partnership with China Mobile (CM) over the next few months should
be positive and heighten investor interest in the name. Furthermore, JV
investments with CM should benefit FET in the long run. We expect earnings to
bottom out this year and rebound in 2010, and non-operating loss items are
likely to narrow. We raise our June-10 DCF-based PT from NT$41 to NT$45,
implying 16% upside plus a 7% cash dividend yield.
• Downgrade Taiwan Mobile from OW to N: TWM’s share price has reached
our price target and we see little fundamental upside from these levels. TWM’s
increasing desire to be acquisitive using its treasury shares makes us a little bit
cautious. A cable acquisition or other acquisition may not be accretive in the
near term and is not without risks, in our view. In addition, TWM’s ongoing 2G
asset write-offs of around NT$1.5B per annum continue to be a drag on earnings
growth. Our June-10 PT (DCF-based) is unchanged at NT$57.
• Maintain N on Chunghwa Telecom: CHT remains our preferred stock in Asia
for pure defensiveness. For investors looking for a large-cap, liquid stock in
which to invest for earnings stability and yield, CHT is our recommended pick.
Despite a slowing top line, CHT continues to enjoy near 50% EBITDA margins
due to good cost controls. CHT’s capital management initiatives are ahead of its
peers. Our June-10 DCF-based PT is raised moderately by 4% to NT$71.
• FET is our top pick in the space: TWM’s share price is up 25% year-to-date,
outperforming both CHT (up 10% YTD) and FET (up just 4% YTD); hence we
believe further upside for TWM is limited. Going forward, we expect FET to
have more catalysts than CHT and TWM to drive its share price higher. Key
risks to our PTs include irrational wireless competition and unforeseen
regulatory changes.
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