About a year ago CLSA said mobile network operator SmarTone was expected to be more shareholder-friendly with its large cash surplus. With the company confident it could maintain its cash flow, the broker expected a major dividend increase within months.
Trading at an ex-cash price/earnings of only five times relative to market price earnings of 14 times, with a forecast double-digit yield, the stock offered attractive value. It set a target price of HK$10.60, an upside of about 15 per cent, and recommended the stock as a 'buy'. The counter was trading at $9.40 a year ago.
In September SmarTone rewarded its shareholders with a cash dividend payout of $2.19 billion as it reported a 254 per cent increase in annual profit. It paid a final dividend of $3.77 per share. This and the improved business outlook lifted SmarTone's share price to $12.50 at one stage, its highest since February 2001.
In March SmarTone said earnings increased just 5.38 per cent to $235 million in the six months to December as a price war undermined profitability. The customer base increased 9.5 per cent to 1.04 million users. On Friday the counter closed at $8.15.
