Post on 04-Feb-2016
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Chad StutzRyan Cook
Fin 724/824
Review of RecommendationsOverweight Telecom
Telecoms have steady cash flows, so...
Balance SIM growth portfolio with “Defensive-Growth” stocksStructure holdings to emphasize wireless industry
Primary focus in emerging marketsAdd 156 bps to portfolio
SIM PORTFOLIO Sector Presentation earned an additional 156
basis points for the Telecommunications Sector
Currently the only stock the SIM portfolio holds in Telecommunications is America MovilQuantity Security Ticker
GIC Sector
Unit Cost Total Cost
Market Price
Market Value
Unrealized Gain/(Loss)
10,900 American Movil SA AMX
Telecom
41.04
$447,341.38 32.85
$358,065.00 ($89,276)
Approved May 26th S&P Weight SIM Weight Overweight Telecommunications 3.71% 3.96% 0.25%
América Móvil, S.A.B. de C.V. (AMX)3rd largest wireless network operator in world
182 mil wireless subscribersLargest corporation in Latin AmericaOperates in 18 countriesPrimarily Wireless Company
Fixed line operations in Central America & Caribbean
Operates in Mexico as Telcel = #1 wireless company
Operates in Brazil as Claro = #2 largest marketOperates in U.S. as TracFone = pre-paid provider
Valuation Analysis: Price Multiples
AMX - Target Price & UpsideCurrent Price $38.33 Implied equity value/share $43.62 Upside/(Downside) to DCF 13.81%
Sensitivity Analysis
AMX RecommendationUpside of 13.81% from DCF
Lowest DCF upside of 4 companies we reviewed
AMX is approaching maturity stage of life cycleEvidenced by market saturation in major
marketsGood company, but there are better
opportunitiesSELL all shares = 240 bps
NII Holdings, Inc. (NIHD)Originally organized in 1995 as a holding
company for the operations of Nextel Communications, Inc. in selected international markets.
Operates in the emerging markets in Latin America.
Beta of 2.22 very cyclical stock.Reports its results of operations in U.S.
dollars, therefore changes in exchange rates can affect earnings reports.
Valuation Analysis: Price Multiples
NIHD - Target Price & UpsideCurrent Price $20.46Implied equity value/share $30.70 Upside/(Downside) to DCF 50.03%
NIHD RecommendationUpside of 50.03% from DCFExtremely cheap price multiplesLatin American wireless
NIHD has more room to grow than AMXCyclical growth stockBUY 75 bps
Verizon Communications (VZ)iPhone contract with AT&T expires in 201o,
Verizon is in discussions with Apple to develop an iPhone for Verizon with the goal of introducing it next year.
40 percent of iPhone users are new AT&T subscribers, contributing to yet another net gain in wireless customers.
Verizon can expect similar results if Apple does produce a version of the iPhone for Verizon.
Valuation Analysis: Price Multiples
VZ - Target Price & UpsideCurrent Price $29.26 Implied equity value/share $35.22 Upside/(Downside) to DCF 20.35%
VZ RecommendationUpside of 20.35% from DCFUnderpriced multiplesiPhone on the horizon (4G)Domestic defensive stock = sector
diversificationBUY 50 bps
China Mobile Limited (CHL)World’s #1 mobile operator - in terms of
subscribers 415 mil wireless subscribers (2/3 of China market)
Largest company on Hong Kong Stock Exchange1/2 of new subscribers in 2007 from rural areas
Continued growth will be fueled by rural expansionState-owned corporationThis year, the company will start rolling out 3G
More data plans = more revenueiPhone?
Valuation Analysis: Price Multiples
CHL - Target Price & UpsideCurrent Price $49.21Implied equity value/share $80.76 Upside/(Downside) to DCF 64.11%
Sensitivity Analysis
CHL RecommendationUpside of 64.11% from DCFVery cheap price multiplesDefensive Growth companyOpportunities for continued growth in rural
regions3G on the horizon
Wireless data & possible iPhoneBUY 271 bps
RecommendationsRating Ticker BPS Upside
Sell AMX 240 13.81%
Buy VZ 50 20.35%
Buy NIHD 75 50.03%
Buy CHL 271 64.11%Total 396
AMX has low DCF valuation and is approaching maturity. Goodcompany, but there are better ones
VZ is a defensive domestic thatkeeps us diversified while positioning for growth
NIHD is a cyclical growth stock that seems undervalued and has a very impressive upside
CHL is a defensive growth stock with the highest upside and potential for major growth in rural regions