manish, william, & sarah. current holdingssuggested holdings at&t0% verizon0% china...
TRANSCRIPT
![Page 1: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/1.jpg)
Manish, William, & Sarah
![Page 2: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/2.jpg)
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%
![Page 3: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/3.jpg)
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.
![Page 4: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/4.jpg)
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%
![Page 5: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/5.jpg)
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
![Page 6: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/6.jpg)
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
![Page 7: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/7.jpg)
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
![Page 8: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/8.jpg)
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
![Page 9: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/9.jpg)
![Page 10: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/10.jpg)
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)
![Page 11: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/11.jpg)
Largest telecom company in US ( Market cap $147.68 billion)
Best brand in Telecom - Ranked no. 1 company in telecom sector by fortune magazine (11 times in last 14 years)
Business Segmentation• Wireline Services – Voice and Data (55% of total
revenues)• Wireless Communications and Services (39% of total
revenues)• Advertising and publishing (4% of total revenues)• Other Segment (2% of total revenues)
Major competitors - Verizon, Sprint Nextel Corp. and T-mobile USA, Inc.
![Page 12: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/12.jpg)
($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
![Page 13: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/13.jpg)
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
![Page 14: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/14.jpg)
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
![Page 15: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/15.jpg)
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
![Page 16: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/16.jpg)
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
![Page 17: Manish, William, & Sarah. CURRENT HOLDINGSSUGGESTED HOLDINGS AT&T0% Verizon0% China Mobile Ltd.2.41% NII Holdings0.98% Buy: AT&T2.14% NII](https://reader031.vdocuments.site/reader031/viewer/2022013004/56649de85503460f94ae1ea4/html5/thumbnails/17.jpg)