Emile Farsoun

Equity Bottom-Up

China Unicom Hong Kong / Equity Bottom-Up

We launch on <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> as a new 'Buy' idea, driven by improving growth prospects, better free cash flow generation on reduced Capex intensity and cheap valuation.We believe 2020 will be a turning point for CU. After several years of ARPU declines, we see pricing stabilization, market share gains and improved ROIC for the company, which should drive a re-rating of the stock. The stock price has declined (~5%) since the announcement of third quarter results, erasing the rally after the September 9th announcement of cooperation and sharing of capex with <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-adr" target="_blank" data-smartkarma-citation="entities:1017:1" rel="noopener">China Telecom Corp Ltd (Adr) (CHA US)</a> on 5G.In our view, the stock is trading at a 30% discount to fair value of HKD$ 10.25 per share, at a fair forward EV/EBITDA multiple of 3.25x.

We launch on China Unicom Hong Kong (762 HK) as a new 'Buy' idea, driven by improving growth prospects, better free cash flow generation on reduced Capex intensity and cheap valuation.We believe 2020 will be a turning point for CU. After several years of ARPU declines, we see pricing stabilization, market share gains and improved ROIC for the company, which should drive a re-rating of the stock. The stock price has declined (~5%) since the announcement of third quarter results, erasing the rally after the September 9th announcement of cooperation and sharing of capex with China Telecom Corp Ltd (Adr) (CHA US) on 5G.In our view, the stock is trading at a 30% discount to fair value of HKD$ 10.25 per share, at a fair forward EV/EBITDA multiple of 3.25x.

China Unicom Hong Kong

China Unicom (762 HK): New Buy Idea