China Communication Services 0552

[winston]

DJ UPDATE: China Communications Services 1H Net Profit Up 33%

(Adds comments from company chairman on business outlook.) By Lorraine Luk Of DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--China Communications Services Corp. (0552.HK) said Tuesday its first-half net profit rose 33% from a year earlier because of strong orders in its domestic market.

"Currently, there are signs of gradual recovery in the macroeconomic environment, but the upward trend is not yet stable," Chairman Li Ping said in a statement. He said the firm will continue to seek opportunities for mergers and acquisitions and aim to boost revenue from its overseas operations.

The company, which provides telecommunications services to the parent companies of China Mobile Ltd. and China Telecom Corp., said its net profit for the six months ended June 30 was CNY758 million, up from CNY568.8 million a year earlier.

Revenue rose 32% to CNY18.26 billion from CNY13.87 billion. The company said revenue from overseas doubled to CNY595 million from the same period last year.

China Communications Services has benefited from an increase in spending by China's telecommunications companies on infrastructure after the issuance of third-generation licenses in China earlier this year.

Li said the increase in demand from telecommunications operators for network maintenance and optimization, product and service distribution, and value-added business development will be sustainable.

The continued development of technology in the telecommunications sector will continue to provide new opportunities for the company, he said.

China Communications Services is controlled by state-owned China Telecommunications Corp., which is also the parent of Hong Kong-listed China Telecom Corp.

Like last year, the Hong Kong-listed telecommunications support services provider didn't declare a first-half dividend.

[winston]

DJ MARKET TALK: GS Keeps China Communications Services At Buy

June 29, 2009

1233 [Dow Jones] STOCK CALL: Goldman Sachs maintains positive view on China Communications Services (0552.HK), given its reasonable 12X FY109 P/E. Says it's too early to see whether China could accept/adopt a third party tower owner/lease model in terms of agreement from either regulatory authorities or from operators. "If this big picture direction is decided upon, we believe CCS could be seen as an ideal entity to operate the tower company, and could a subsidiary with meaningful equity ownership from the operators to do so." Adds, any positive progress on this front could serve as a catalyst for re-rating of CCS. keeps at Buy with HK$5.40 target price

[winston]

DJ MARKET TALK: GS Cuts China Communications Services Target

0910 [Dow Jones] STOCK CALL: Goldman Sachs cuts China Communications Services (0552.HK) target to HK$5.25 from HK$5.40 after lowering FY09-FY11 earnings forecasts by 7%-9%; says 1H results slightly below house's view.

But keeps at Buy on valuation; "the stock is very inexpensive relative to peers on (P/E), but has lagged notably due to its defensive nature and concerns over growth post-2010.

Thus, progress on the new tower-sharing business may be a significant catalyst going forward." Notes, management reiterated that CCS should achieve 3-year revenue CAGR of 15%.

[iam802]

China Communications Services Corp (0552) : Poise for another breakdown.

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Chart Review of China Commercial Services.

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On the Daily Ichimoku chart, the first bearish sign occurs between August 5 to August 14 (highlighted by the green oval shape)

1. Price action dips below the thin kumo support (starting from August 4)

2. On August 14, we see that the Tenkan sen cuts the Kijun sen (another bearish indication; follows by a sharp drop in price)

The price rebounded off its low of about 4.34 in early September but recent price actions had seen it going below the support level at 4.48

With the support level gone, there is a high chance that it will trade between 4.34 and 4.48

Looking at the latest Tenkan sen and Kijun sen (highlighted by the yellow oval shape), there is a possibility that we may see another bearish indication. If it cuts, I believe, the support at 4.34 will be break and price will go even lower

Note: 4.34 is also the kumo support on the Weekly Ichimoku chart.

[iam802]

China Communications Services Corp (0552) : Sitting Dangerously on Kumo Support

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On the Ichimok Weekly Chart, we can now see that China Communications Services (0552) is sitting just on top of the kumo support.

If this support breaks (or if it does not move up within a month), we can easily see that the price will pierce through the support and that will signal a bearish outlook.

[winston]

Not vested. From UOBKH:-

Valuation/Recommendation

Ytd, CCS’ share price (-18.8%) has underperformed that of the telco equipment plays under our coverage (Comba: +423.2%, ZTE: +143.9%) due to the company’s less attractive earnings growth outlook and poor newsflow.

However, CCS has never missed management’s long-term earnings growth guidance of 15-20% p.a. With the stock trading at only half of ZTE’s FY10F PE and its much better dividend yield, CCS is more attractive at the moment.

Reiterate BUY with a target price of HK$6.20 based on 16x 2010F PE.

[winston]

Not vested.

DJ MARKET TALK: Further Downside For China Comm Svcs Limited -DBS

1532 [Dow Jones] STOCK CALL: DBS tips further downside for China Communications Services (0552.HK) limited after stock underperformed both telcos and telecom equipment companies year-to-date. Estimates stock currently trading at 12X FY10 P/E, at discount to both its average historical valuation and other 3G players.

Tips possible major catalyst from good progress on tower sharing plan. Raises FY11 revenue, earnings forecasts by 4.6% and 5.6%, respectively, after imputing stronger overseas and maintenance revenue. Keeps stock at Buy, target unchanged at HK$6.20.

Source: Dow Jones Newswire

[winston]

Not vested. From Phillips:-

Risks:

Upside risk：
1. CCS increases its M&A which is appreciated by the market.
2. The company increases the dividend payout ratio, due to the coming of mature stage in its lifecycle.
3. Its expanding in overseas market exceeds the expectation.

Downside risk：
1. The drop of revenue from TIS in 2010 exceeds the expectation.
2. The drop of profit margin of the company exceeds the expectation.

Mature stage means perform growth reaching the ceiling
Following the investment weight on middle and down stream in the value chain of this industry, CCS's focus will accordingly be adjusted. With the gradual cut of its main business (TIS) revenue growth, the overall performance growth has reached the peak in 1H09. Meanwhile, maintenance business, BPO in the latter stage as well as overseas business will be the highlight in future.

In an overall, we think the company has entered its mature stage, on which it will continue merging to keep its growth and raise dividend payout ratio to support its valuation. For a company with stable growth like this kind, stable and considerable dividend yield is critical for attracting long term investment.

Based on the current price, we estimated 2.89% dividend yield in 2009 and 3.15% in 2010, largely in line with HSI Index (2.78% now). Given its still up yet not strong overall valuation attraction, we rate CCS “Hold”, with 12-Month TP of HK$4.50.

[winston]

Not vested.

DJ MARKET TALK: Daiwa Ups China Communications Services To Hold
December 11, 2009

1414 [Dow Jones] STOCK CALL: Daiwa upgrades China Communications Services (0552.HK) to Hold from Underperform. "Revenue from business process outsourcing, the second-largest revenue contributor, should increase at faster rate than that for the telecommunications infrastructure services (TIS) unit in FY10, driven by network maintenance, facility management and distribution businesses."

Projects 23% on-year decline in total telecom capex by three telecom operators in China to about MYR300 billion for 2010 but says management still targets to maintain revenue growth of its core TIS business by expanding sales to corporate and government segments.

Expects China Communications Services (CCS) to continue to record positive operating cash flow, to maintain generous dividend policy with dividend-payout ratio of about 40% for FY09-12, offering dividend yield of 3.9% for FY10.

Trims target to HK$4.22 from HK$4.47 based on target PER of 11X on house FY10 EPS forecast.

Source: Dow Jones Newswire

[winston]

DJ MARKET TALK: GS Cuts China Comm Services Target To HK$5.15
November 30, 2009

1240 [Dow Jones] STOCK CALL: Goldman Sachs cuts China Communications Services (0552.HK) target to HK$5.15 from HK$5.25, after lowering FY09-11 EPS forecasts by 1%-2% on adjustment on sales assumptions and revised Chinese telcos capex forecasts post-operators' 3Q09 results.

"We think the recent share price underperformance was mainly due to the defensive nature of the stock in a market preferring high-beta names." Adds, however, there's limited potential downside to earnings, current valuation of 11X FY10 P/E nearly at bottom of historical valuation range. Keeps stock at Buy.

Source: Dow Jones Newswire