HONGKONG Telecom is the SAR's main provider of fixed-line telecommunications services, as well as being engaged in other lines of telecom business.
DBS Securities Hong Kong has an outperform recommendation on the stock, citing a target price of $19 over the next year.
The brokerage said the company was one of the world's cheapest telecom stocks, with a dividend yield twice that of similarly sized Hong Kong companies.
Increasing revenue from its fixed-line network would offset a decline in international call fees, allowing earnings to bottom out in the financial year to next March.
Rebalancing of residential tariffs, greater penetration of its broadband service and higher revenues from third parties using its network would give the company a stable and diverse earnings base.
Despite the deregulation of Telecom's key businesses, it would maintain steady volumes and margins, thanks to market growth and falling costs. Earnings should receive a boost in the long run from electronic commerce, property redevelopment and other investments.
