Transcript Telecom Sector Presentation May 11, 2010 Jiying Wang YongHui Wu Agenda • Recommendations • Sector Overview • Analyses: o Business o Economic o Financial o Valuation • Conclusion.

Telecom Sector Presentation
May 11, 2010
Jiying Wang
YongHui Wu
Agenda
• Recommendations
• Sector Overview
• Analyses:
o Business
o Economic
o Financial
o Valuation
• Conclusion
Recommendation
• Increase SIM holding by 30 basis points to bring
it to 4%
• Possible reallocation of funds within the SIM
Telecommunication Sector
Sector Overview
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%
Sector Information: Size
Industry Information
Name
Telecom Services - Foreign
Market
Cap
5462.1b
Wireless Communications
524.5b
Application Software
506.3b
SIM Holding Information
Name
Market
Cap
Diversified Computer System 279.3b
Verizon
Communication,
79.69b
Sector Total
NII Holdings, Inc.
5.97b
Total
85.66b
Telecom Services – Domestic 284.9b
9059.8b
Largest Companies
Wireless Communications
Telecom Service-Domestic
Name
Market Cap
Name
Market Cap
China mobile
189.5b
AT&T
148.3b
America Movil
S.A.B. de C.V
77.0b
Verizon
79.7b
BCE
22.4b
NTT DOCOMO
64.3b
Century Tel
9.9b
Deutsche
Telekom AG
47.1b
Qwest
Communication
Internati
8.8b
China Unicom HK 27.7b
NIHD is ranked 13 in wireless communication
Current Performance
S&P 500
Telecom Service
1 Day
-1.53%
-0.63%
MTD
-6.39%
-3.71%
QTD
-5.01%
-5.06%
YTD
-0.38%
-10.43%
Business Analysis
Wireless Communication
Telecom Service - Domestic
• Growth
• Mature
– Still expanding, especially
internationally
– Huge capital spending
required
• Cyclical
– Fluctuates a lot with
business cycle
– Established networks and
slow demand increase
– Little need for increased
capital spending
• Cyclical
– Relatively more resistant to
economic fluctuations
Supply & Demand
• Ability to add new supply
– 3G market, especially in developing countries
– 4G market in the more developed countries
• Demand varies globally
– Higher demand increase in developing countries and little demand
increase in more developed countries
– Innovations and advances in technology help to create new demand
• Possible external factors
– Government regulations
Porter’s 5 Forces
Wireless
Communications
Telecom Services –
Domestic
Threat of new entry
High
High
Buyer power
Moderate
Moderate
Supplier power
Moderate
Low
Availability of substitutes
High
High
Competition
High
High
Economic Analysis
Positive
•
•
•
•
GDP growth
Population growth – especially growth in middle class of developing nations
Consumer confidence
Per capita income
Negative
•
•
Unemployment rate
Energy Prices – increase cost of operation
Economic Analysis
Economic Analysis
Economic Analysis
Economic Analysis
Financial Analysis
Telecommunication
Financial Analysis
Telecommunication
Financial Analysis
Verizon Communications Inc.
Financial Analysis
Verizon Communications Inc.
Financial Analysis
NII Holdings, Inc.
Financial Analysis
NII Holdings, Inc.
Valuation Analysis
Relative to
S&P500
P/Trailing E P/Forward E P/B
P/S
P/CF
Sector
0.73
0.94
0.7
0.8
0.4
Wireless
Communication
NM
NM
0.6
0.6
0.4
Telecom Service
– Domestic
0.67
0.82
0.8
0.8
0.4
NIHD
0.92
1.1
1.1
1.2
0.7
VZ
0.71
0.88
0.9
0.6
0.4
Broken Bollinger line of Telecom Sector
Broken trend line of NIHD
Broken support of VZ
Conclusion
• This sector is slightly undervalued
• Foresee growth in wireless telecom and
international markets
• Increase SIM portfolio by 30 basis points to 4%
Q&A