Recommendation Industry Information Analysis ◦ Business ◦ Economic ◦ Financial ◦ Valuation...
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Transcript of Recommendation Industry Information Analysis ◦ Business ◦ Economic ◦ Financial ◦ Valuation...
![Page 1: Recommendation Industry Information Analysis ◦ Business ◦ Economic ◦ Financial ◦ Valuation Summation and comments.](https://reader035.fdocuments.net/reader035/viewer/2022062720/56649f155503460f94c2a5eb/html5/thumbnails/1.jpg)
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Recommendation Industry Information Analysis
◦ Business◦ Economic◦ Financial◦ Valuation
Summation and comments
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Decrease SIM portfolio by 42 basis points to come in line with S&P 500
Reallocate funds within the Telecommunication SIM Sector
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Sector S&P 500 SIM Portfolio DifferenceConsumer Discretionary 9.11% 7.51% -1.60%Consumer Staples 11.94% 12.23% 0.29%Energy 12.35% 12.80% 0.45%Financials 14.66% 6.59% -8.07%Health Care 12.65% 13.13% 0.48%Industrial 10.09% 11.97% 1.88%Information Technology 19.04% 21.97% 2.92%Materials 3.39% 4.52% 1.13%Telecommunications 3.09% 3.51% 0.43%Utilities 3.68% 3.19% -0.49%
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Industries Market CapWireless Telecom Service $12.00Integrated Telecom Service $116.90
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Largest Companies in the Telecom Sector AT&T
◦ Former SBC merged with AT&T creating the new AT&T (USA) China Mobile
◦ Formerly China state-owned, now still state-controlled, one of two mobile phone monopolies in the entire China.
Vodafone ◦ Britain's largest telecom operator.
Verizon Communications◦ US-based telecom company formed after a series of mergers.
Deutsche Telekom◦ German telecom company, also owns T-Mobile.
America Movil◦ Mexican operator controlled by the world's richest man - Carlos
Slim.
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MTD QTD YTD-5.05% -5.05% -7.95%
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Mature and Defensive (Industry Specific)◦ Established networks and low maintenance costs,
little need for increased capital spending.◦ More resistant to economic fluctuations, domestic
and foreign. Marketing Mix Indicators
◦ Product◦ Price◦ Distribution◦ Promotion
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.85 Beta
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Demand saturated with providers New capacity
◦ 3G and 4G networks◦ Open Interface programming
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Government Regulations Currency Fluctuations New Innovations Spectrum Availability Workforce
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Domestic and International Spectrum availability User dynamics
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Threats of New Entrants◦ Capital intensity◦ Ownership of a telecom license◦ Acceptable radio spectrum
Power of Suppliers◦ Large number of vendors dilutes the bargaining power
Power of Buyers◦ Increasing choice◦ Low differentiation◦ Switchover costs
Availability of Substitutes◦ Cable TV, Satellite Operators, and Internet
Competitive Rivalry◦ Cut-Throat◦ Low price and slight differentiations
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Economic Factor CorrelUnemployment -0.65Consumer Confidence 0.72New Homes 0.81Federal Funds Rate 0.74Capital Spending 0.82
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Sector Growth Financial Analysis Sales Earnings 5-year Growth Rate 8% 9% 2005 2006 2007 2008 2009 AverageNet Profit Margin 10.1% 10.3% 10.4% 9.4% 8.5% 9.7%Return on Equity 14.8% 14.3% 14.9% 13.4% 13.9% 14.3%
S&P 500 Growth Financial Analysis Sales Earnings 5-year Growth Rate 7% 0% 2005 2006 2007 2008 2009 AverageNet Profit Margin 8.8% 9.3% 8.9% 6.5% 6.2% 7.9%Return on Equity 17.6% 21.0% 17.0% 15.0% 11.0% 16.3%
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Industry - Wireless Growth Financial Analysis Sales Earnings 5-year Growth Rate 6% -19% 2005 2006 2007 2008 2009 AverageNet Profit Margin 11.2% 10.1% 6.8% 1.4% 1.0% 6.1%Return on Equity 12.3% 7.6% 4.9% 2.7% 2.2% 5.9%
Industry - Integrated Telecom Growth Financial Analysis Sales Earnings 5-year Growth Rate 10% 14% 2005 2006 2007 2008 2009 AverageNet Profit Margin 10.1% 10.4% 11.0% 10.6% 9.6% 10.3%Return on Equity 15.7% 18.0% 19.0% 16.0% 16.8% 17.1%
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AT&T
2005 2006 2007 2008 2009 Average
Net Profit Margin 10.9% 11.7% 10.0% 10.4% 17.9% 12.2%
Return on Equity 10.1% 8.6% 10.4% 12.2% 15.6% 11.4%
2005 2006 2007 2008 2009 Average
Total Sales $ 43,862 $ 63,055 $ 118,928 $ 124,028 $ 123,008 $ 94,576
Depreciation $ 7,622 $ 9,879 $ 21,546 $ 19,883 $ 19,661 $ 15,718
Depreciation % of Sales 17.4% 15.7% 18.1% 16.0% 16.0% 16.6%
Operating Margins 14.1% 16.3% 17.2% 18.2% 18.5% 16.9%
Operating Cash Flows Positive Operating Cashflows
Verizon
2005 2006 2007 2008 2009 Average
Net Profit Margin 9.8% 6.2% 5.9% 6.6% 6.7% 7.0%
Return on Equity 19.2% 12.4% 11.1% 13.9% 14.9% 14.3%
2005 2006 2007 2008 2009 Average
Total Sales $ 75,112 $ 88,144 $ 93,469 $ 97,354 $ 103,970 $ 91,610
Depreciation $ 14,047 $ 14,545 $ 14,377 $ 14,565 $ 15,596 $ 14,626
Depreciation % of Sales 18.7% 16.5% 15.4% 15.0% 15.0% 16.1%
Operating Margins 19.0% 15.2% 16.7% 17.3% 17.0% 17.0%
Operating Cash Flows Positive Operating Cashflows
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Sector S&P 500 Wireless Integrated
P/Trailing E -33% -33% 209% -34%
P/Forward E -11% -16% NM -18%
P/B -19% 14% -33% -22%
P/S -33% -18% -59% -33%
P/CF -36% -20% -60% -29%
>30% below mean – Green>0% above mean - Red
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Company Comparison NIHD AT&T VerizonP/Forward E -28% -16% -13%P/S -58% -24% -43%P/B -71% -32% -26%P/EBITDA -64% -40% -49%P/CF -55% -36% -25%
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Slightly undervalued, Defensive (.85), Cheap relative to S&P 500
Potential growth in wireless and data division
Cut throat competition in the growth areas Tightening profit margins in the wireless
industry Uncertainty in global financial market
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Decrease SIM portfolio by 42 basis points to come in line with S&P 500
Reallocate funds within the Telecommunication SIM Sector
Questions?