Xiaoou Zhang
Xiaoxu Yu
Agenda
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
Overview
SIM
S&P 500
Financials
16.03%
Financials
14.99%
Health Care
12.34%
Energy
10.93%
Health Care
12.07%
Energy
9.83%
Industrials
10.16%
Info Tech
18.10%
Cons Staples
10.93%
Cons Disc
11.62%
Utilities
3.45%
Materials
3.45%
Industrials
9.99%
Cons Staples
12.59%
Cons Disc
12.28%
Telecom Svc
2.98%
SIM is underweighted by 216 basic points than S&P 500. Only stock: NIHD
Info Tech
18.14%
Cash Utilities
3.38% 3.27%
Materials
2.63%
Telecom Svc
0.82%
Sector
Telecom
Industries
Market
cap
# of
stocks in
S&P 500
Alternative
carriers
63.3 B
0
Integrate
telecom svc
1.33 T
5
Wireless
telecom svc
1.08 T
3
Major Players on the Market
Performance – Price returns
•
Smallest market cap sector
•
Telecom QTD = 7.81%
S&P 500 QTD = 9.16%
* Source: http://www.standardandpoors.com/indices/sp500/en/us/?indexId=spusa-500-usduf--p-us-l--
Performance – Price
Performance – Revenues (Billion)
interg
telcom
1240
62%
wireless
telcom
734.4
36%
alternative
carriers
37.39
2%
•
Revenues up 8% last
quarter
•
Revenues up 6% last 12
months
Dividend yield
4.40%
4.50%
3.80%
4.00%
3.50%
2.60%
3.00%
2.20%
2.20%
2.50%
2.00%
1.90%
1.60%
2.00%
1.40%
1.30%
1.50%
1.00%
0.50%
0.00%
Cons Disc
Cons Staples
Energy
Financials
Health Care
Industrials
Info Tech
Materials
Telecom Svc
Utilities
Important Factors
•
Technology innovation
•
Currency exchange rate
•
Government Regulations
–
–
•
License
Spectrum
Population growth
•
Demographics (Population age
structure)
–
Young people are more likely to
adopt new technology
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
Life Cycle
•
Maturity (sales still growing)
•
Wired telecom is declining
•
Wireless telecom is developing (quality increasing)
Five Forces’ Analysis
Threats of
New Entrants
Power of
Suppliers
Power of
Buyers
Availability of
Substitutes
Competitive
Rivalry
Capital intensity
Large number
of vendors
dilutes the
bargaining
power
Increasing
choice
Cable TV,
Satellite
Operators, and
Internet
“Cut-Throat”
Ownership of a
telecom license
Acceptable
radio spectrum
Solid operating
skills and
management
experience
Low
differentiation
Switchover
costs
Low price and
slight
differentiations
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
Nominal GDP
•
Defensive Sector
–
More resistant to
economic
fluctuations,
domestic and
foreign
Consumer Confidence
Consumer Spending
Disposable Income
Capital Spending
Capital Spending - Communication Equipment
Employment
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
Telecommunication Sector
Sales Per Share
Absolute
Earnings Per Share
Earnings Per Share
Absolute Growth
Integrated telecom Services Industry
Sales Per Share
Absolute
Earnings Per Share
Earnings Per Share
Growth relative to
Sector
Wireless Telecom Services Industry
Sales Per Share
Absolute
Earnings Per Share
Earnings Per Share
Growth relative to
Sector
AT&T
Sales Per Share
Absolute
Earnings Per Share
Earnings Per Share
Growth relative to
Sector
Verizon
Sales Per Share
Absolute
Earnings Per Share
Earnings Per Share
Growth relative to
Sector
Sprint
Sales Per Share
Absolute
Earnings Per Share
Earnings Per Share
Growth relative to
Sector
Telecommunication Sector
Revenue
Absolute
EBITDA Margin
EBITDA Margin
Relative to S&P500
Telecommunication Sector
Net Profit Margin
Relative to S&P500
Absolute
ROE
ROE
Relative to S&P500
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
Sector-Industry-Company
Telecom Sector
P/Trailing E
P/Forward E
P/B
P/S
P/CF
22.2
19.1
2.4
1.3
6.1
Integrated
Wireless
AT&T Verizon Sprint
Telecom Industry Industry
17.4
NM
15.6 21.8
NM
15.5
NM
14.4 17.7
NM
2.3
3
2.1
3.7
2.2
1.4
1
1.6
1.2
0.5
5.9
8.8
6.5
6.1
6
Sector
Absolute Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
22.2
22
2.7
2.0
7.0
Low
9.7
10.5
1.3
0.9
3.6
Median
16.4
15.7
2.0
1.3
5.4
Current
22.2
19.1
2.4
1.3
6.1
Relative to SP500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
1.6
1.7
1.0
1.4
0.7
Low
0.68
0.79
0.6
0.8
0.4
Median
0.99
1.0
0.8
1.0
0.6
Current
1.5
1.3
1.0
1.0
0.6
Integrated Telecom Services
Absolute Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
18.1
18.5
3.4
2.0
7.2
Low
9.1
9.9
1.4
1.0
3.8
Median
14.8
14.2
2.1
1.4
5.3
Current
17.4
15.5
2.3
1.4
5.9
Relative to SP500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
1.3
1.2
1.1
1.4
0.7
Low
0.62
0.72
0.5
0.8
0.4
Median
0.93
0.95
0.8
1.0
0.5
Current
1.2
1.1
1.0
1.0
0.6
Wireless Telecom Services
Absolute Basis
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
175.8
223
4.4
2.9
9.3
Low
12
14.6
0.3
0.4
1.6
Median
22.9
22.6
1.5
1.1
6.2
Current
NM
NM
3.0
1.0
8.8
Relative to SP500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
9.4
14.6
1.4
1.9
1.0
Low
0.78
0.95
0.2
0.5
0.2
Median
1.4
1.5
0.6
0.8
0.6
Current
NM
NM
1.3
0.7
0.9
AT&T
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.1
1.2
1.3
1.9
1.5
0.78
0.84
0.7
1.1
0.9
0.95
0.95
0.9
1.3
1.1
0.90
0.93
0.9
1.1
1.1
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.2
1.2
1.0
2.2
0.9
0.52
0.68
0.6
1.0
0.4
0.92
0.90
0.7
1.3
0.6
1.1
1.0
0.9
1.1
0.6
Verizon
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.3
1.2
1.8
1.1
1.0
0.72
0.74
0.7
0.6
0.6
1.0
0.98
1.2
0.8
0.8
1.3
1.1
1.6
0.9
1.0
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
1.5
1.4
1.8
1.2
0.6
0.51
0.62
0.7
0.6
0.3
0.82
0.84
0.9
0.8
0.4
1.5
1.2
1.6
0.9
0.6
Sprint
Relative to
Industry
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
5.5
1.5
1.7
0.9
0.8
0.06
0.13
0.3
0.2
0.3
0.81
0.87
0.6
0.5
0.5
NM
NM
0.7
0.5
0.7
Relative to S&P
500
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
24.4
12.2
1.1
1.0
0.6
0.39
0.46
0.2
0.2
0.1
0.92
0.94
0.4
0.5
0.3
NM
NM
0.9
0.4
0.6
•
Overview
•
Business Analysis
•
Economic Analysis
•
Financial Analysis
•
Valuation Analysis
•
Recommendations
Leave the Telecom Sector as it is!!!
•
Growing Sector while underperforming S&P500
•
Duopoly mode where AT&T and Verizon are too high to buy
•
One and unique NIHD - give it more time to recover
•
Opportunities for M&A; Large CAPEX…
•
Unforeseeable factors that may boom the sector
We are glad to answer your Questions