[ET Net News Agency, 26 July 2019] Morgan Stanley cut its target price for Hutchison
Telecommunications HK (HutchTel)(00215) to HK$2 from HK$3.5 mainly reflecting the special
dividend distribution (HK$0.8 per share) and lower earnings forecasts. It also downgraded
its rating from "overweight" to "equal-weight".
The research house factored in HutchTel's acquisition of a minority stake in its mobile
arm. It lowered its 5G spectrum cost assumption from HK$1.5bn to HK$800mn to reflect the
very low reserve prices from the regulator. The lower revenue and rising spectrum
amortization, along with declining interest income after distributing the special
dividend, translate to big reductions in its outer-year earnings forecasts.
Morgan lowered its perpetual growth rate for the mobile business from 2% to 1%,
reflecting the long-term difficulty for mobile operators in monetizing data traffic and
the risk of roaming revenue removal. (KL)