Company Presentation June 1, 2010 Jiying Wang YongHui Wu.
Transcript of Company Presentation June 1, 2010 Jiying Wang YongHui Wu.
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Company Presentation
June 1, 2010
Jiying Wang
YongHui Wu
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Agenda
• Recap of Recommendations• Sector Summary• NII Holding Analysis• Verizon Analysis• Conclusion
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Recap of Recommendation
• Increase SIM holding by 30 basis points to bring it to 4%
• Sell Verizon by 101 basis points
• Increase NIHD by 131 basis points
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Sector Summary
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%
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Sector Holdings
Current Recommended +/-
SIM Holding 3.7% 4% 0.3%
NIHD 2.69% 4% 1.31%
VZ 1.01% 0% -1.01%
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Target Prices
Company Current Price Target Price Dividend Upside Potential
NIHD $36.70 $60 N/A 64%
VZ $27.52 $32 6.8% 16%
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NIHD Overview
• Funded in 1995 as Nextel International, Inc. and changed its name to NII Holdings, Inc. in December 2001
• Providing fully integrated mobile communication services in selected Latin American markets
• Currently operating in Argentina, Brazil, Mexico, Peru and Chile
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NIHD Business Analysis
• Market Cap of $5.71b• High Beta of 2.09• Company in growth phase
– High growth rate– Heavily financed through debt
• Possible factors to affect performance– Exchange rate– Interest rate
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NIHD Financial Analysis
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NIHD Financial Analysis
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NIHD DCF Analysis
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NIHD Sensitivity Analysis
Discount rate = 10%
Terminal growth rate =3%
Current price $36.7Implied equity value/share $66.0Upside potential 80%
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NIHD Valuation Analysis
Average price = $60
Absolute Valuation
High Low Median Current #Your Target Multiple
*Your Target E, S, B, etc/Share
Your Target Price (F x G)
A. B. C. D. E. F. G. H. P/Forward E 34.3 6.7 19.0 17.8 19.0 2.3 43.70 P/S 109.6 0.5 3.5 1.5 2.5 30.0 75.00 P/B 16.9 1.2 7.7 2.5 3.8 15.96 60.65 P/EBITDA 213.98 1.95 12.62 5.14 8.5 7.76 65.96 P/CF 36.5 2.8 13.2 7.6 10.0 5.25 52.50
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Potential Catalysts & Risks
Catalysts
• Global economic recovery
• Growth of emerging markets
• Expansion of 3G markets
Risks
• Exchange rates
• Possible double dip recession
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Brazilian Real to USD
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Chilean Peso to USD
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Mexican Peso to USD
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Argentine Peso to USD
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Peruvian Nuevo Sol to USD
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Verizon Overview
The largest mobile operator in the States.
The second largest US-based telecom company.
Two major business lines:• Domestic wireless Offer wireless voice and data products, and other value-added services, as well as sells
equipment.
• Wireline Provide voice, Internet access, broadband video and data, next generation Internet protocol (IP)
network services, network access, and long distance services to consumers, carriers, businesses, and government customers.
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VZ Business Analysis
• Market Cap of $77.79b• Beta: 0.62• Company in mature phase
– Slow growth rate of wireless unit– Wireline unit is slightly decreasing
• Possible factors to affect performance– GDP growth– Consumer confidence– Unemployment rate– Interest rate
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VZ Financial Analysis
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VZ Financial Analysis
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VZ DCF Model
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VZ Sensitivity Analysis
Current price $27.52Implied equity value/share $31Upside potential 12.65%
Discount rate = 9.5%
Terminal growth rate =3%
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VZ Valuation Analysis
Absolute Valuation
High Low Median Current #Your Target Multiple
*Your Target E, S, B, etc/Share
Your Target Price (F x G)
A. B. C. D. E. F. G. H.
P/Forward E 17.6 11.1 12.9 12.7 13 2.33 30.29
P/S 1.5 0.8 1.2 0.8 1 38.27 38.27
P/B 2.7 1.7 2.2 2.1 2.5 13.83 34.58
P/EBITDA 5.22 2.69 3.50 3.03 3.5 9.59 33.57
P/CF 6.0 3.6 4.3 3.6 4 8.07 32.28
Average price: $34
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VZ Summary
Catalysts:
4G Technology
Verizon iphone!
Risks:
Its Wireline unit declines year by year and offsets the benefits generated from Wireless unit.
Changes of regulation
Increased competition
Verizon’s financial performance is not very satisfactory.
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NIHD vs. VZ
Five Year Stock Comparison
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Conclusion
Verizon is a good stock but NIHD just performs better. So we decide to:
• Sell Verizon (101 BP)
• Buy NIHD (131 BP to 400 BP)
• Total Telecom sector holdings – 400 BP (an increase of 30 BP)
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Q&A