GS 高盛 - 中国联通 - China Unicom

07.13 17页

What's changed
China Unicom (CU) share price is up 18% YTD, outperforming HSI by 3.8pp
but underperforming MSCI China by 10pp. During this period, despite
mostly unchanged consensus operating forecasts & no concrete data
points on a potential CU-breakup, CU’s consensus rating has improved
noticeably. While macro factors such as exchange rates may have
contributed to this, we think the more significant driver behind this is the
market’s move towards more generous valuation methodologies, such as
pegging comparables’ EV/EBITDA or EV/sub multiples to CU’s businesses
or giving CU full credit for ‘post break-up’ efficiency improvement impact
on segmental DCFs. We update our ests to reflect 1Q07 trends/higher Rmb
assumptions—operating forecasts are only marginally affected (07E/08E
recurring EPS rise by 3%/8%), but our GSM value rises while CDMA falls—
our 12-m SOTP-based TPs rise from HK$10 to HK$11.5 for CU; from Rmb
5.4 to Rmb 5.8 for CU’s A-share; from US$12.82 to US$14.74 for the ADR.
Implications
We are cautious about CU’s operating results in coming quarters, and
believe the more generous consensus valuation methods may suffer
shortfalls. While CU’s reported EV/EBITDA and EV/sub may seem low,
these figures are not comparable to that of those peers that