WHAT THE BROKER SAYS
Risks and greater debt needed to expand in emerging markets have prompted Macquarie to rate Hutchison Telecommunications International (HTIL) 'under-perform', which means its return is expected to be less than 10 per cent.
The company plans to launch services in Vietnam early next year and in Indonesia by the middle of the year. It also hopes to expand services to cover all regions of India.
The broker says slowing Indian subscriber growth is the primary concern, and expanding the India footprint carries uncertainty and risk. The start-up ventures in Indonesia and Vietnam involve the potential need for additional capital. The company has sufficient debt capacity - with the backing of its parent, Hutchison Whampoa - but it may look to the equity markets if it underestimates requirements.
Expansion in India, needed to fuel future growth, may not be smooth as risks exists in plans to buy new mobile licences from its partner Essar Group and Hutchison Max Telecom's intension to buy BPL Communications.
Macquarie is reviewing its earnings estimates for HTIL and has set a 12-month price target of $7, from $9.30 on August 12. The counter closed on Friday at $9.55.