Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile...
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Transcript of Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile...
Manish, William, & Sarah
CURRENT HOLDINGS SUGGESTED HOLDINGS
AT&T 0% Verizon 0% China Mobile Ltd.
2.41% NII Holdings 0.98%
• Buy: AT&T 2.14% NII Holdings 0.27%
• Sell China Mobile Ltd.
2.41%
Smallest company of the three with a market cap of 3.93B
Competes in a foreign, niche market in South and Latin America
Has a high beta of 2.02 and behaves more like a growth stock
Is a young company with limited historical data.
Growth: Credit: History:
• Spin off of Nextel• Rapid growth in Latin
and Central America• Downturn in profits
associated w/unemployment and Mexico problems (N1H1, drug trafficking decreased tourism)
2009 2010 2011
Projected Sales 5.27B 4.80B 4.20B Projected Earnings 350M 320M 250M
2006 2007 2008
ROE 2.7 3.2GPM 72% 72% 73%
Valuation measures:• Historical price ratios—the ratios have currently
contracted, most likely due to the economy• Future valuations—as the economy improves, the
ratios should expand Relative to the industry and S&P 500
• The ratios have contracted Target price: $33.86 Major determinants of value: operating
margin on service revenues, depreciation expense and capital expenditures
Relative to Industry
High Low Median Current Target Multiple
Target E, S, B, etc/Share
Target Price
P/Trailing E 3.2 0.15 1.4 0.19
P/Forward E 2.2 0.04 1.3 0.04
P/B 7.9 1.3 4.4 1.5
P/S 3.3 0.9 2.0 1.1
P/CF 5.7 1.2 2.7 1.5
EntValue/EBITDA
4.10 1.06 2.67 1.28
P/Trailing E 3.2 0.53 2.0 0.63
P/Forward E 2.3 0.60 1.4 0.62
P/B 4.7 0.8 2.9 0.8
P/S 3.4 0.8 2.1 0.8
P/CF 3.0 0.4 1.7 0.5
EntValue/EBITDA
2.92 0.55 1.89 0.67
P/Forward E 34.3 6.7 22.5 9.3 15.9 2.5 40.30
P/S 5.4 0.5 3.2 0.7 2.0 33.7 65.66
P/B 14.4 1.2 8.3 1.7 5.0 13.9 69.32
P/EBITDA 20.38 1.98 12.82 2.95 7.9 8.0 63.00
P/CF 32.8 2.8 18.7 4.1 11.4 5.7 65.54
Buy 0.27% of NIHD to bring the holding up to 1.25% of the total SIM
Primary catalysts• Valuation: 80%/20% DCF/Valuation model
gives a 1 year target price of $33.86 Risks:
• Double Dip recession (high beta)• Political uncertainty
China Mobile provides a wide variety of mobile communication services in 31 provinces in China
Largest wireless provider in the world by customer
In January 2009, the company started offering 3G services
Beta: .91
Sell 2.41% of CHL Primary Catalyst: successful 3G
network Risks:
• High penetration rate• Strong competition in Chinese market• Market in certain large cities showing signs
of maturity• iPhone?? Potential deal between Apple and
China Unicom (competitor of China Mobile)
Largest telecom company in US ( Market cap $147.68 billion)
Best brand in Telecom - Ranked no. 1 company in telecom sector by fortune magazine (11 times in last 14 years)
Business Segmentation• Wireline Services – Voice and Data (55% of total
revenues)• Wireless Communications and Services (39% of total
revenues)• Advertising and publishing (4% of total revenues)• Other Segment (2% of total revenues)
Major competitors - Verizon, Sprint Nextel Corp. and T-mobile USA, Inc.
($MM) 2008 2007 2006 2005 2004 Trend
Revenue $124,028 $118,928 $63,055 $43,848 $40,733 Up
Net Income $12,867 $11,951 $7,356 $4,870 $4,487 Up
EPS 2.17 1.95 1.89 1.42 1.78 Up
Total Assets$265,24
5 $275,64
4 $270,63
4 $145,63
2 $110,26
5 Up
Dividend 1.61 1.47 1.35 1.3 1.26 Up
Capital Expenditure per year
$0
$5,000
$10,000
$15,000
$20,000
$25,000
2008 2007 2006 2005 2004
Current Price $24.45Implied equity value/share $36.27Target Price $26.99Upside to DCF 48.35%
Discount Rate
Terminal Growth Rate
9.5 10 10.5 11 11.5 12 12.5
2.5 40.23 37.46 35.03 32.88 30.98 29.28 27.75
3 42.02 38.94 36.27 33.94 31.88 30.06 28.42
3.5 44.09 40.65 37.69 35.13 32.90 30.92 29.17
4 46.55 42.64 39.33 36.50 34.04 31.89 30.00
4.5 49.50 45.00 41.25 38.08 35.35 33.00 30.93
5 53.10 47.83 43.51 39.91 36.87 34.26 31.99
5.5 57.60 51.29 46.23 42.09 38.63 35.71 33.20
Absolute Valuation
Median Current #Your Target Multiple
*Your Target E, S, B, etc/Share
Your Target Price (F x G)
P/Forward E 16.0 8.5 12.5 2.01 25.13
P/S 2.1 1.1 1.3 21.82 28.37
P/B 2.2 1.5 1.7 16.27 27.66
P/EBITDA 5.23 2.89 3.4 8.46 28.76
P/CF 6.7 3.9 4 6.27 25.08
Buy 2.14% of AT&T • Primary catalysts
Valuation: 80%/20% DCF/Valuation model gives a 1 year target price of $34.14
Brand name, Market Cap and ability to form alliance- (Apple iPhone 3G)
Pros:• 2008 annual report marked
Consolidated revenues up by more than 4 percent to $124 billion in year.
Reported earnings per share grew by 11.3 percent to $2.16 per share.
Returned $15.6 billion to stockholders through dividends and share repurchases.
Delivered strong cash flow - 25th consecutive year of dividend growth
Cons:• Slow growth due to cut throat competition and worsening economy
Buy AT&T (2.14%)• Very large upside, largest telecom company
in the US Buy NII Holdings (0.27%)
• Niche market, upside. Sell China Mobile (2.41%)
• Reaching its maturity, small downside, increasing competition