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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Prefer telcos with EPS upgrade potential: Buy AIS, BRTI, IDEA, ISAT
Telcos outperformed benchmark indices due to defensive nature
The MSCI APAC ex Japan telco index is up 5% ytd and has outperformed
the MSCI APAC index by 22% mainly due to the defensive nature of
revenues, higher yields and limited impact from forex movements. In our
telecom coverage, we prefer telcos which have better visibility on earnings
upgrades due to improving fundamentals, and fewer downside risks to
our/consensus estimates due to any adverse macro conditions.
We like Bharti, Idea, AIS and Indosat from our coverage universe
Our top picks in our coverage are Bharti and Idea Cellular from India (as
we expect tariff hikes, 3G uptake to drive consensus upgrades), AIS from
Thailand (3G will likely drive margin improvement as operators can
migrate subs from high regulatory fee 2G network to low fee 3G network)
and Indosat from Indonesia (execution improvement as new mgmt has
taken control). We estimate Indosat, Bharti, Idea and AIS will show a 2010-
13E EPS CAGR of 41%, 28%, 36% and 7% respectively.
Prefer India/Thailand telcos market over Indonesia/Philippines
We believe business fundamentals for India telcos are the strongest in our
coverage as the competitive intensity is declining with strong operators
getting stronger and see room for further tariff hikes and 3G uptake to help
revenues and margins for Bharti/Idea. In ASEAN, we prefer Thai telcos over
Indo and Philippines, as we believe improving visibility on 3G licensing in
the coming months would help Thai telcos re-rate as 3G would help
operators improve margins and return ratios. We believe the Indonesian
market is going through a transition phase to accommodate more data
traffic on its network: putting more load on network capex and opex in the
near term. In the Philippines, competitive intensity remains high and
operators are witnessing an increase in capex/opex as composition of lowmargin voice/data is increasing at the expense of high-margin SMS revs.
Near-term momentum but not yet structural Buys
Although PT Telkom/PLDT have 2011E higher yields (4.5%/9.6%) and lower
gearing (2011E net debt/EBITDA of 0.2X/0.8X), we do not consider them as
Buys, given fixed-line drag and the estimated impact on capex/opex to
handle more data load. However, in the current macro environment,
stocks may do well given their defensive characteristics.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Prefer telcos with EPS upgrade potential: Buy AIS, BRTI, IDEA, ISAT
Telcos outperformed benchmark indices due to defensive nature
The MSCI APAC ex Japan telco index is up 5% ytd and has outperformed
the MSCI APAC index by 22% mainly due to the defensive nature of
revenues, higher yields and limited impact from forex movements. In our
telecom coverage, we prefer telcos which have better visibility on earnings
upgrades due to improving fundamentals, and fewer downside risks to
our/consensus estimates due to any adverse macro conditions.
We like Bharti, Idea, AIS and Indosat from our coverage universe
Our top picks in our coverage are Bharti and Idea Cellular from India (as
we expect tariff hikes, 3G uptake to drive consensus upgrades), AIS from
Thailand (3G will likely drive margin improvement as operators can
migrate subs from high regulatory fee 2G network to low fee 3G network)
and Indosat from Indonesia (execution improvement as new mgmt has
taken control). We estimate Indosat, Bharti, Idea and AIS will show a 2010-
13E EPS CAGR of 41%, 28%, 36% and 7% respectively.
Prefer India/Thailand telcos market over Indonesia/Philippines
We believe business fundamentals for India telcos are the strongest in our
coverage as the competitive intensity is declining with strong operators
getting stronger and see room for further tariff hikes and 3G uptake to help
revenues and margins for Bharti/Idea. In ASEAN, we prefer Thai telcos over
Indo and Philippines, as we believe improving visibility on 3G licensing in
the coming months would help Thai telcos re-rate as 3G would help
operators improve margins and return ratios. We believe the Indonesian
market is going through a transition phase to accommodate more data
traffic on its network: putting more load on network capex and opex in the
near term. In the Philippines, competitive intensity remains high and
operators are witnessing an increase in capex/opex as composition of lowmargin voice/data is increasing at the expense of high-margin SMS revs.
Near-term momentum but not yet structural Buys
Although PT Telkom/PLDT have 2011E higher yields (4.5%/9.6%) and lower
gearing (2011E net debt/EBITDA of 0.2X/0.8X), we do not consider them as
Buys, given fixed-line drag and the estimated impact on capex/opex to
handle more data load. However, in the current macro environment,
stocks may do well given their defensive characteristics.
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