China Telecom

Strong gains forecast for telecoms heavyweight

PUBLISHED : Friday, 11 February, 2000, 12:00am
UPDATED : Friday, 11 February, 2000, 12:00am

Goldman Sachs expects China Telecom (Hong Kong) will jump a further 25 per cent in the next year to $80 on the back of increasing global valuations of cellular operators.

The bullish call on the stock comes after the counter rose 20.75 per cent in the last week and more than 140 per cent since last October.

'It is really driven by a reflection of an expansion of cellular valuations around the world,' Goldman Sachs telecommunications analyst Tim Storey said.

The counter fell 0.38 per cent yesterday to close at $64.

Goldman Sachs forecasts China Telecom's subscriber base will reach 21 million at the end of this year compared with 15.5 million at the end of last year.

Some analysts feel it is impossible to put a target price on the firm.

'There are variables which cannot be defined at the moment - for example how many other provincial wireless assets are going to be injected into China Telecom at a favourable price,' Nomura International telecommunications analyst Richard Ferguson said. 'I feel setting a price target is just a waste of time really.' Mr Ferguson agreed, however, that China Telecom still had room to move higher.

'Global wireless valuations are high and increasing [so] momentum will carry China Telecom up in that direction,' Mr Ferguson said.

Mr Storey said valuations of cellular operators were high, and that could lead to volatility in cellular operators' share prices globally including China Telecom's.

'We have to recognise there is fragility in share prices in the cellular sector right now because we are generally near all-time highs for a lot of companies,' Mr Storey said.

Higher global valuations of cellular stocks would also be justified by the introduction of electronic commerce services over mobile phones.

'We generally believe the model that is evolving for cellular companies . . . will continue to support generally higher valuation multiples,' Mr Storey said.

On Tuesday, China Telecom overtook HSBC to become the largest play in the Hong Kong stock market.