Salomon predicts Telecom at $18

PUBLISHED : Tuesday, 14 May, 1996, 12:00am
UPDATED : Tuesday, 14 May, 1996, 12:00am
 

Andrew Harrington, telecom analyst at Salomon Brothers, sees Hongkong Telecom rising to $18 over the next year - 18.4 per cent above yesterday's close.


The utility rose 20 cents, or 1.33 per cent, yesterday to $15.20, on relatively heavy turnover of $117.59 million, making Telecom the fourth most active share of the day.


That movement was roughly in line with the overall rise in the market, but yesterday's positive performance reverses the profit-taking seen on the counter late last week.


Analysts believed the group's share price could make more ground.


Mr Harrington said cost saving on staff reductions was expected to buoy group earnings and raise profit growth to 15 per cent by the end of next year.


Voluntary redundancy plans, announced in March, were coming on better than expected, with 550 acceptances out of 3,000 eligible staff.


'We restate our view there is significantly greater potential for cost cutting than Hongkong Telecom has publicly acknowledged,' the brokerage said.


Salomon forecast there could be an additional staff reduction of 1,050 in 1996-1997 and a saving of $1.35 billion in the staff bill by 1997-1998.


This is equivalent to 4 per cent of the company's revenues forecast at that time.


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