Market Report Summary - 14 April 2015
Core Content Overview
This report provides a detailed analysis of Beijing Digital Telecom (6188.HK) for the year 2014 and its outlook for 2015, alongside updates on the TMT sector and market indicators. It also includes a comparison of the company's valuation with its peers and highlights recent developments in the tech and media industry.
Key Takeaways from Beijing Digital Telecom 2014 Results
- 2014 Revenue: Rmb14.36bn, up 12.07% YoY.
- Revenue Drivers: Growth in mobile telecom devices and accessories sales, and service income from mobile carriers.
- 2015 Outlook: Expected stable growth, with focus on expanding retail and distribution networks to third and fourth tier cities.
- Retail Sales: Sold 10.63 million mobile handsets in 2014, driven by strong sales of iPhone 6 and iPhone 6 Plus, and Huawei Mate 7.
- Store Distribution: As of end of April 2014, had 1,512 stores (956 independent, 556 via franchisees), primarily in first and second tier cities.
- Strategic Partnerships: Continued strengthening of cooperation with mobile carriers, with revenue from China Telecom reaching Rmb304.36mn, up 61.88% YoY.
- Service Income Breakdown: China Telecom contributed 50.1%, China Mobile 36.0%, and China Unicom 13.0% to total service income in 2014.
- Valuation: Trading at 7.17x FY15F PE, lower than its HK internet peers (around 20x+), indicating potential undervaluation.
- EPS: Adjusted EPS for 2015F is Rmb0.61, showing a growth of 3.8% YoY.
- Market Cap: HK$3.63bn.
- Stock Performance: 6188.HK has shown positive growth in the last 6 months, with a 27.3% increase.
TMT Sector Highlights
- Alibaba's Mapping Service AutoNavi Unveils LBS+ Open Platform: AutoNavi, fully owned by Alibaba, launched an open platform for location-based services, covering areas like car rental, O2O, smart devices, and environmental protection.
- WeChat Karaoke Integration: Chinese users can now book and pay for karaoke sessions directly through WeChat, with multiple karaoke chains integrating the feature.
- AirMedia Wi-Fi Rights: AirMedia received exclusive rights to install and operate Wi-Fi systems on ordinary trains operated by Shanghai Railway Bureau.
- 51yongche Series C Funding: Ridesharing app 51yongche raised Series C funding of "tens of millions" in China.
- Baidu's Investment in Tiantian Yongche: Baidu invested in Tiantian Yongche, adding another ridesharing app to its portfolio.
Stock Market Performance (13 April 2015)
| Market Index |
Price |
Absolute Change |
% Change |
| Hang Seng Index |
28,016 |
744 |
2.7 |
| H-share Index |
14,590 |
603 |
4.3 |
| CSI 300 Index |
4,421 |
77 |
1.8 |
| Shanghai Composite Index |
14,150 |
136 |
1.0 |
| Shenzhen Composite Index |
2,188 |
39 |
1.8 |
| Nikkei 225 |
19,905 |
(2) |
(0.0) |
| Korea KOSPI |
2,099 |
11 |
0.5 |
| Taiwan TWSE |
9,667 |
49 |
0.5 |
| India Sensex 30 |
29,044 |
165 |
0.6 |
| DJIA |
17,977 |
(81) |
(0.4) |
| S&P500 |
2,092 |
(10) |
(0.5) |
| NASDAQ |
4,988 |
(8) |
(0.2) |
| UK FTSE 100 |
7,064 |
(25) |
(0.4) |
| Germany DAX |
12,339 |
(36) |
(0.3) |
| France CAC40 |
5,254 |
14 |
0.3 |
Other Market Indicators (13 April 2015)
| Indicator |
Price |
Absolute Change |
% Change |
| WTI Oil |
$51.9 |
0.3 |
0.5 |
| Gold |
$1,200.0 |
(4.5) |
(0.4) |
| Copper Futures |
$6,039.0 |
0.0 |
0.0 |
| Aluminum Futures |
$1,765.0 |
0.0 |
0.0 |
| CRB Futures |
216.8 |
(0.3) |
(0.1) |
| Baltic Dry Index |
578.0 |
(2.0) |
(0.3) |
| UST 3m Yield |
0.01 |
(0.01) |
- |
| UST 10y Yield |
1.93 |
(0.020) |
- |
| HIBOR 3m |
0.39 |
0.000 |
- |
| USD LIBOR 3m |
0.28 |
0.000 |
- |
Valuation Comparison (HK Internet Peers)
| Company |
MktCap (USD mn) |
EV |
Last Price (USD) |
1M % |
3M % |
6M % |
Adjusted EPS (USD) |
PE (x) |
| Baidu |
75,334 |
70,692 |
214.8 |
5.06 |
-2.19 |
7.57 |
0.23 |
37.92 |
| Sohu |
2,227 |
2,016 |
57.8 |
17.36 |
38.44 |
49.53 |
0.26 |
159.81 |
| Sina |
2,500 |
1,409 |
37.5 |
12.54 |
4.82 |
0.08 |
0.45 |
30.43 |
| Bitauto |
2,463 |
2,266 |
54.0 |
13.53 |
-18.80 |
-44.28 |
0.10 |
23.5 |
| Autohome |
5,484 |
5,314 |
50.0 |
24.93 |
37.33 |
21.76 |
0.45 |
159.81 |
| Qihoo 360 |
7,496 |
7,541 |
59.5 |
28.80 |
43.79 |
35.62 |
0.23 |
16.95 |
| Youku |
2,948 |
1,765 |
14.9 |
-6.29 |
-9.26 |
-8.99 |
0.07 |
247.86 |
| Soufun |
2,989 |
2,760 |
7.2 |
33.83 |
38.44 |
49.53 |
0.26 |
159.81 |
| Ctrip |
8,531 |
8,650 |
63.1 |
43.79 |
39.39 |
38.11 |
0.26 |
16.95 |
| JD.com |
45,920 |
41,540 |
33.2 |
18.34 |
39.39 |
38.11 |
-1.74 |
645.57 |
| NetEase |
15,525 |
12,216 |
118.8 |
24.11 |
13.68 |
44.10 |
5.85 |
16.95 |
Key Financial Metrics (Beijing Digital Telecom)
| Metric |
2014 (Rmb mn) |
2013 (Rmb mn) |
2012 (Rmb mn) |
| Revenue |
14,358.6 |
12,812.0 |
8,802.7 |
| Gross Profit |
1,976.6 |
1,738.0 |
1,463.0 |
| Operating Profit |
535.9 |
466.1 |
414.4 |
| Net Income |
318.1 |
266.4 |
252.1 |
| EPS |
0.55 |
0.53 |
0.50 |
| P/E |
7.17 |
4.88 |
4.36 |
| P/B |
0.37 |
-- |
-- |
Strategic Position and Outlook
- Growth Strategy: Expand retail and distribution network to lower-tier cities to capitalize on 4G network growth.
- Strategic Partnerships: Strengthen relationships with mobile carriers to enhance service business.
- Acquisition Potential: Strong brand awareness, large user base, and good carrier relationships position it as an acquisition target and O2O partner.
- Future Opportunities: Expected to benefit from the growth of the 4G network and increased retail presence in lower-tier cities.
Shareholding Structure
| Shareholder |
Percentage |
| 31 INFOCOMM LTD |
26.48% |
| CDH MOBILE HK LTD |
21.66% |
| CITIGROUP INCORPORATED |
12.46% |
| LENOVO GROUP LTD HK |
10.00% |
Conclusion
Beijing Digital Telecom reported in-line 2014 results with growth in both revenue and service income. The company plans to maintain a stable growth pace in 2015 by expanding its retail and distribution network and enhancing strategic cooperation with mobile carriers. The TMT sector showed several key developments, including the integration of karaoke services into WeChat, the launch of LBS+ by AutoNavi, and new investments in ridesharing apps. The stock is currently undervalued compared to its HK internet peers, offering potential growth opportunities.
