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Chris Hoare
  • Chris Hoare

Chinese Telcos Q2 25 review: Improving margin, lower capex

Service revenue growth stayed modest with China Telecom improving while peers slowed. EBITDA margins are expanding which drove mid-single digit earnings growth. YTD capex is down 16% YoY ahead of the 9% fall guided for full year. China Telecom will be added to the Hang Seng Index from next week. For investors unable to access this space, we recommend to monitor the developments in China as we see it as a leading indicator for EM telcos more broadly.

Chris Hoare
  • Chris Hoare

China Tower (Buy, TP: HK$14, +24%) Q2 25 Quick Take: Stable growth, D...

Both revenue and EBITDA trends slowed but were in-line with expectations. Margins improved again which led to earnings progression and a 21% rise in interim dividends. We see our thesis playing out as stabilised revenue growth coupled with falling depreciation is supportive of earnings and therefore dividends growth. The stock had a good run but remains relatively cheap (4.7x FY25 EV/EBITDA), hence we remain Buyers with a HK$ 14 price target

Chris Hoare
  • Chris Hoare

Global EM Towers - A Consistent Approach to EFCF and Shareholder Remun...

Following a similar note we published on the EM Telco sector, we apply the same consistent approach to Equity FCF for Global EM Towers. We have preferred Telcos over Towers for some time, as the drivers of upside for the Telcos (consolidation and declining capital intensity) is a headwind for the Towers.

Chris Hoare
  • Chris Hoare

EM Towers Q1 CY25 review: Steady as she goes

Tower revenue trends were slower across the board except for India’s Indus Tower as it benefited from VIL’s network catch up spend. However, EBITDA margins are improving except in Indonesia which faces the near-term pressure of the XL-Smartfren consolidation.

Chris Hoare
  • Chris Hoare

Chinese Telcos Q1 25 review: Better profitability despite slower topl...

Service revenue trends slowed in Q1 amid macro headwinds, but EBITDA returned to growth. This continued to drive earnings and therefore dividend growth. With capex continuing to fall in absolute terms, the Chinese telcos continue to look cheap. For investors unable to access this space, we recommend to monitor the developments in China as we see it as a leading indicator for EM telcos more broadly.

Chris Hoare
  • Chris Hoare

China Unicom (Buy, TP: HK$ 13.2, +52%) Q1 25 Quick Take: Slower reven...

Service revenue growth slowed from a strong Q4 but profit trends improved, and EPS growth was better. Not disclosed but cash flow should be strongly higher on these figures given declining capex. Given EPS drives the dividend this seems positive to us, and we remain Buyers.

Chris Hoare
  • Chris Hoare

Chinese Telcos Q4 24 review: Still growing; continued fall in absolut...

Chinese Telcos saw service revenue return to mid-single digits growth in 4Q24. Despite a blip in EBITDA trend, the industry ended 2024 with 6% earnings growth which translated to higher dividend payouts (CM: 73%, CT: 72%, CU: 60%).

Chris Hoare
  • Chris Hoare

Global EM Telcos A Consistent Approach to EFCF and Shareholder Remune...

Amidst tariff-inspired chaos we introduce a consistent way to calculate Equity FCF for Global EM Telcos. Improvements in market structure and synergies from consolidation has led to a steep increase in sector cash flow.

Chris Hoare
  • Chris Hoare

China Tower (Buy, TP: HK$14, +14%) Q4 24 Quick Take: Rising Two Wings...

China Tower saw Q4 revenue and EBITDA ahead of consensus by 0.9% and 4.8% respectively, led by strong momentum in Two Wings and good cost control. As margins have started to stabilise and earnings up 10% in 2024, the company announced an 11% increase in dividends which implies a 76% payout, in-line with its guidance. As depreciation is set to fall this year, we expect earnings to grow rapidly which should be supportive of the ongoing shareholder remuneration policy. At 3.5x FY25 EV/EBITDA, China...

Chris Hoare
  • Chris Hoare

Global EM Telcos & Towers Introducing the NSR Global EM Telco & Tower...

In a separate note published last week we introduced the NSR GEM-Top 8. However, many of the stocks in that list are not liquid and so, given the tailwinds we now see in the Telco industry we introduce a second list – the GEM Telco & Towers Liquid Compounders; large cap, well-managed telcos in attractive markets at cheap valuations that are likely to generate market-beating returns over time. These are the best large cap investments in the Global EM Telco & Towers space we think.

Chris Hoare
  • Chris Hoare

Chinese Telcos & Tower Outlook 2025: Expect performance to continue,...

Despite slowing top line, 2024 was another banner year for investors in the Chinese Telcos & China Tower as capex remains contained and shareholder remuneration improves.

Chris Hoare
  • Chris Hoare

Chinese Telcos Q3 24 review: Macro continues to impact the top line

Service revenue trend kept steady relative to Q2, albeit being slower than before due to macro headwinds. Yet earnings momentum continued to trend in the mid-single digits overall as we saw good cost control by China Telecom again (acceleration in EBITDA) while peers were cushioned by lower D&A costs (back by easing capex).

Chris Hoare
  • Chris Hoare

China Tower (Buy, TP: HK$ 1.40, +30%) Q3 24 Quick Take: Faster EBITDA...

EBITDA and net profit trends improved in Q3 despite a slowdown in Tower revenue. Nevertheless, higher growth DAS and Smart Tower business continue to perform decently, with the latter accelerating.

Chris Hoare
  • Chris Hoare

EM Towers Q2 CY24 review: Improving trends in China and Africa, Indon...

Revenue and EBITDA trends improved again for China Tower, which alongside stable depreciation supported bottom-line momentum. In Indonesia, MTEL and TOWR continued to perform where the latter benefited from faster growth in its Fibre business thus should act as a buffer should the XL and Smartfren deal were to proceed.

Chris Hoare
  • Chris Hoare

Chinese Telcos Q2 24 review: Strong earnings despite softer topline; ...

Despite the slowdown in service revenue trend from softer macro, Chinese operators still delivered a strong earnings growth. Interim dividends rose by 7-22% YoY as all three raised payout ratios. Despite the share prices already roughly doubling, we remain bullish on exposure to China’s structural enterprise theme, improving capital intensity and improved shareholder remuneration.

Chris Hoare
  • Chris Hoare

China Tower (Buy, TP: HK$ 1.40, +45%) Q2 24 Quick Take: Sustained pro...

Both revenue and EBITDA trends improved, with KPIs looking healthy and Core Tower reverting to growth again. As depreciation costs continue to slow, earnings have been growing rapidly, up 10% YoY in the first half. China Tower has also announced its first interim dividends (RMB 0.0109/share) and guided for full year’s dividends to be no less than 75% payout.

Chris Hoare
  • Chris Hoare

Chinese Telcos Q1 24 review: Sustained topline growth with some margi...

Chinese telcos sustained another quarter of MSD service revenue growth whilst seeing some relief off margin pressure. Of the three, China Telecom remained the outperformer on both metrics despite some slowdown from Enterprise.

Chris Hoare
  • Chris Hoare

China Tower (Buy, TP: HK$1.4, +49%) Q4 23 Quick Take: Slower but dece...

China Tower reported a slower but decent set of Q4 numbers. TSP and DAS trends slowed vs. Q3 but the Two Wings business continued to post strong growth.

Chris Hoare
  • Chris Hoare

EM Telcos Q1 23: Slowdown in India, elsewhere strong

EM Telcos top line growth slowed somewhat in Q1 driven by price increases in India lapping. However, other markets stayed strong and simple average revenue growth was 9%. Our thesis remains that EM telcos are set to grow sustainably at GDP+ rates.

Chris Hoare
  • Chris Hoare

New Street: Chinese Telcos Q3 22 review: High-single digit growth aga...

Chinese telcos reported high-single digit service revenue growth again, driven by Enterprise and a better mobile performance. However, EBITDA growth and margin saw some pressure, attributed to higher personnel, marketing costs and Enterprise-related technical costs.

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