[ET Net News Agency, 24 January 2018] BofA Merrill Lynch lifted its target price for
China Unicom (00762) to HK$12.3 from HK$12.1, and maintained its "neutral " rating.
The research house updated its forecast model to incorporate: (1) an increase in 6.65bn
shares outstanding; (2) receipt of cash of RMB75bn from new share issuance on 28 November
2017.
With the cash pile received via Unicom BVI, BofAML noted China Unicom is likely to use a
portion of the cash proceeds to repay bank loans, thereby lowering the company's interest
expense. It thinks that is mainly why the market is optimistic towards Unicom achieving
FY2018's requirements to unlock employee shares.
Given pre-tax profit has to nearly double from FY2018 to FY2019 in order to unlock
employee shares in FY2019, the research house believes the market remains skeptical
towards the company's operating condition in FY2019. (KL)