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2007-8-23 11:04:00 a.m. HKT, XFNA
BROKER CALL - China's Tom Group kept 'sell' on unclear H2 outlook - Citigroup
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BEIJING (XFN-ASIA) - Citigroup is maintaining its ""sell"" rating and
target price of 0.90 hkd on China's Tom Group due to the firm's unclear
wireless value-added services (WVAS) business outlook.
""Though Tom Online's privatization has been approved and Tom Group has
disclosed more (details of its) Eachnet joint venture plans, the core WVAS
business remains challenging with an uncertain second half outlook,"" the
brokerage said in a research note.
It said that Tom Group does not offer steady growth in a ""volatile""
market given that WVAS accounts for around 50 pct of its total revenues and
profits.
Tom Group reported recorded a net loss of 72 mln hkd in the first half
compared with a profit of 91.3 mln hkd a year earlier. Its revenue of 1.35
bln hkd was also down 8.6 pct year-on-year albeit slightly above Citigroup's
estimate of 1.32 bln hkd.
Internet revenue was 565 mln hkd, down 4 pct from the previous half and
28 pct from a year ago, while profit in the segment profit dropped 73 pct
year-on-year to 57 mln hkd.
The brokerage noted that while the new Eachnet platform, which was
launched in mid-July, offers greater access speed, it will likely record
losses in the near to medium term.
""We do not expect a material improvement in the operating or regulatory
environment in the second half,"" Citigroup said.
At 10.13am, Tom Group Ltd was flat at 0.74 hkd.
(1 usd = 7.6 yuan; 7.8 hkd)
joshua.lipes@xfn.com
jps/kmq xfnjps/xfnkm
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