company presentation june 1, 2010 jiying wang yonghui wu

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Company Presentation June 1, 2010 Jiying Wang YongHui Wu

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Page 1: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Company Presentation

June 1, 2010

Jiying Wang

YongHui Wu

Page 2: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Agenda

• Recap of Recommendations• Sector Summary• NII Holding Analysis• Verizon Analysis• Conclusion

Page 3: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Recap of Recommendation

• Increase SIM holding by 30 basis points to bring it to 4%

• Sell Verizon by 101 basis points

• Increase NIHD by 131 basis points

Page 4: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Sector Summary

Sector S&P 500 Weight SIM Weight +/-

Consumer Discretionary 10.55% 10.44% -0.11%

Consumer Staples 10.91% 11.71% 0.80%

Energy 11.18% 9.76% -1.43%

Financials 16.47% 11.41% -5.07%

Health Care 11.55% 14.63% 3.07%

Industrials 10.76% 13.10% 2.34%

Information Technology 18.91% 20.18% 1.27%

Materials 3.45% 1.64% -1.82%

Telecommunication Services

2.73% 3.70% 0.98%

Utilities 3.48% 2.10% -1.38%

Cash 0.00% 1.26% 1.26%

Dividend Receivables 0.00% 0.08% 0.08%

  100.00% 100.00% 0.00%

Page 5: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Sector Holdings

Current Recommended +/-

SIM Holding 3.7% 4% 0.3%

NIHD 2.69% 4% 1.31%

VZ 1.01% 0% -1.01%

Page 6: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Target Prices

Company Current Price Target Price Dividend Upside Potential

NIHD $36.70 $60 N/A 64%

VZ $27.52 $32 6.8% 16%

Page 7: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD Overview

• Funded in 1995 as Nextel International, Inc. and changed its name to NII Holdings, Inc. in December 2001

• Providing fully integrated mobile communication services in selected Latin American markets

• Currently operating in Argentina, Brazil, Mexico, Peru and Chile

Page 8: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD Business Analysis

• Market Cap of $5.71b• High Beta of 2.09• Company in growth phase

– High growth rate– Heavily financed through debt

• Possible factors to affect performance– Exchange rate– Interest rate

Page 9: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD Financial Analysis

Page 10: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD Financial Analysis

Page 11: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD DCF Analysis

Page 12: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD Sensitivity Analysis

Discount rate = 10%

Terminal growth rate =3%

Current price $36.7Implied equity value/share $66.0Upside potential 80%

Page 13: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD Valuation Analysis

Average price = $60

Absolute Valuation

High Low Median Current #Your Target Multiple

*Your Target E, S, B, etc/Share

Your Target Price (F x G)

A. B. C. D. E. F. G. H. P/Forward E 34.3 6.7 19.0 17.8 19.0 2.3 43.70 P/S 109.6 0.5 3.5 1.5 2.5 30.0 75.00 P/B 16.9 1.2 7.7 2.5 3.8 15.96 60.65 P/EBITDA 213.98 1.95 12.62 5.14 8.5 7.76 65.96 P/CF 36.5 2.8 13.2 7.6 10.0 5.25 52.50

Page 14: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Potential Catalysts & Risks

Catalysts

• Global economic recovery

• Growth of emerging markets

• Expansion of 3G markets

Risks

• Exchange rates

• Possible double dip recession

Page 15: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Brazilian Real to USD

Page 16: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Chilean Peso to USD

Page 17: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Mexican Peso to USD

Page 18: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Argentine Peso to USD

Page 19: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Peruvian Nuevo Sol to USD

Page 20: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Verizon Overview

The largest mobile operator in the States.

The second largest US-based telecom company.

Two major business lines:• Domestic wireless Offer wireless voice and data products, and other value-added services, as well as sells

equipment.

• Wireline Provide voice, Internet access, broadband video and data, next generation Internet protocol (IP)

network services, network access, and long distance services to consumers, carriers, businesses, and government customers.

Page 21: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ Business Analysis

• Market Cap of $77.79b• Beta: 0.62• Company in mature phase

– Slow growth rate of wireless unit– Wireline unit is slightly decreasing

• Possible factors to affect performance– GDP growth– Consumer confidence– Unemployment rate– Interest rate

Page 22: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ Financial Analysis

Page 23: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ Financial Analysis

Page 24: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ DCF Model

Page 25: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ Sensitivity Analysis

Current price $27.52Implied equity value/share $31Upside potential 12.65%

Discount rate = 9.5%

Terminal growth rate =3%

Page 26: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ Valuation Analysis

Absolute Valuation

High Low Median Current #Your Target Multiple

*Your Target E, S, B, etc/Share

Your Target Price (F x G)

A. B. C. D. E. F. G. H.

P/Forward E 17.6 11.1 12.9 12.7 13 2.33 30.29

P/S 1.5 0.8 1.2 0.8 1 38.27 38.27

P/B 2.7 1.7 2.2 2.1 2.5 13.83 34.58

P/EBITDA 5.22 2.69 3.50 3.03 3.5 9.59 33.57

P/CF 6.0 3.6 4.3 3.6 4 8.07 32.28

Average price: $34

Page 27: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

VZ Summary

Catalysts:

4G Technology

Verizon iphone!

Risks:

Its Wireline unit declines year by year and offsets the benefits generated from Wireless unit.

Changes of regulation

Increased competition

Verizon’s financial performance is not very satisfactory.

Page 28: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

NIHD vs. VZ

Five Year Stock Comparison

Page 29: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Conclusion

Verizon is a good stock but NIHD just performs better. So we decide to:

• Sell Verizon (101 BP)

• Buy NIHD (131 BP to 400 BP)

• Total Telecom sector holdings – 400 BP (an increase of 30 BP)

Page 30: Company Presentation June 1, 2010 Jiying Wang YongHui Wu

Q&A