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Market Report Summary - 21 May 2015

Core Content

This report provides an overview of the TMT (Technology, Media, and Telecommunications) sector and highlights key developments and performance metrics for various equity indices, commodities, and company-specific information, particularly focusing on Comba Telecom (2342.HK).

Main Points

Comba Telecom (2342.HK)

• New International Projects: Comba Telecom has secured three new international project wins in Argentina, including the deployment of DAS (Distributed Antenna System) solutions for mobile coverage at corporate offices, and indoor wireless systems at Ministro Pistarini International Airport and Jorge Newbery Airport.
• DAS Technology: The projects will use ComFlex DAS, which supports multi-band, multi-operator functionality, optimizing investment and improving signal distribution.
• Domestic Policy Initiatives: The company is expected to benefit from MIT's policies aimed at enhancing Internet connectivity through faster and more affordable access, especially in the areas of Antennas & subsystems and wireless enhancement & access.
• Market Growth: The expansion of 4G networks is expected to increase the number of base stations to over 1.3 million by the end of 2015, which could boost demand for the company's products.
• Valuation: As of 20 May 2015, the company is trading at 16.7x 2015F PE, with forward PER expected to decrease slightly to 14.00x by 2016.
• Outlook: Comba Telecom is positioned for growth due to favorable domestic policies and potential 5G investment in the future.

TMT Sector Highlights

• Tencent's Online Bank: Launched a small loan product, Weilidai, targeting 50,000 users on QQ, offering unsecured personal loans up to RMB200,000.
• Alibaba's Taiwan Permit: Alibaba is prepared to apply for a permit to continue operating Taobao in Taiwan, following a 6-month wind-down period if the permit is not obtained.
• P2P Lending: Over 100 P2P lending platforms launched a sales drive, attracting 250,000 consumers who invested 1.1 billion yuan in P2P products.
• E-commerce Expansion: The Chinese government aims to promote e-commerce globally and support it with reduced regulations, eased market access, and lower taxation.
• Mobile Broadband Growth: China has 1.29 billion mobile users, with 49.9% on 3G or 4G, indicating significant growth in mobile broadband usage.

Key Financial Performance

Equity Indices

• Hang Seng Index (HSI): Price at 27,585, down 0.4%.
• H-Share Index: Price at 14,236, up 0.3%.
• CSI 300 Index: Price at 4,755, up 0.5%.
• Shanghai Composite Index: Price at 15,337, up 1.4%.
• Shenzhen Composite Index: Price at 2,619, up 2.0%.
• Nikkei 225: Price at 20,197, up 0.8%.
• KOSPI: Price at 2,140, up 0.9%.
• TWSE: Price at 9,685, down 0.3%.
• Sensex 30: Price at 27,837, up 0.7%.
• DJIA: Price at 18,285, down 0.1%.
• S&P 500: Price at 2,126, down 0.1%.
• NASDAQ: Price at 5,072, up 0.0%.
• FTSE 100: Price at 7,007, up 0.2%.
• DAX: Price at 11,848, down 0.0%.
• CAC 40: Price at 5,133, up 0.3%.

Commodity Prices

• WTI Oil: Price at $59.0, up 1.7%.
• Gold: Price at $1,209.3, up 0.1%.
• Copper: Price at $6,220.0, up 0.0%.
• Aluminum: Price at $1,783.5, down 0.3%.
• CRB Index: Price at 226.4, up 0.1%.
• Baltic Dry Index: Price at 606.0, down 2.3%.
• UST 3m Yield: 0.02%, up 0.01%.
• UST 10y Yield: 2.25%, down 0.041%.
• HIBOR 3m: 0.39%, down 0.002%.
• USD LIBOR 3m: 0.28%, up 0.000%.

Company Financials (Comba Telecom)

Shareholding Structure

• Tung Ling Fok: 32.92%
• Yue Jun Zhang: 10.09%
• Allianz SE: 4.42%

Price Performance

• 2342.HK: Down 1.4% in the last month.
• HSI: Down 1.0% in the last month.
• 2015F PE: 16.7x.
• 2016E PE: 14.00x.

Valuation Table

Income Statement

• Turnover: Increased from 5,720.6 in 2013 to 7,376.8 in 2015.
• Gross Profit: Improved from 1,365.6 in 2013 to 2,013.9 in 2015.
• Net Income: Rose from -240.7 in 2013 to 302.8 in 2015.
• Basic EPS: Increased from -0.14 in 2013 to 0.15 in 2015.
• Growth (YoY): Improved from -18.5% in 2013 to 65.9% in 2015.

Balance Sheet

• Total Assets: Increased from 7,262.4 in 2013 to 10,136.7 in 2015.
• Total Liabilities: Rose from 3,953.4 in 2013 to 6,370.8 in 2015.
• Total Equity: Grew from 3,309.0 in 2013 to 3,766.0 in 2015.
• Cash & Near Cash Items: Increased from 1,472.9 in 2013 to 1,274.8 in 2015.
• Inventories: Grew from 1,731.5 in 2013 to 2,234.9 in 2015.

Cash Flow

• Cash from Operating Activities: Increased from 456.6 in 2013 to 397.0 in 2015.
• Cash from Investing Activities: Decreased from -542.3 in 2013 to -160.6 in 2015.
• Cash from Financing Activities: Increased from 41.1 in 2013 to 30.9 in 2015.
• Net Changes in Cash: Increased from -245.8 in 2013 to 302.8 in 2015.

Conclusion

Comba Telecom is poised for growth due to recent international project wins and favorable domestic policies. The TMT sector showed mixed performance, with notable developments in online banking, e-commerce, and P2P lending. Equity indices and commodity prices reflected a generally positive trend, with some exceptions in specific markets. The company's financials indicate a strong performance in recent years, with increasing turnover and net profit, and a projected growth in the future.