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The following excerpts explain why Zacks senior telecom industry analyst Paul Cheung, CFA remains neutral on China Telecom (CHA), the telecommunications company:
'China Telecom announced disappointing results for the first three quarters, compared with Chinese mobile operators. However, China Telecom is the market leader in fixed-line phone services in one of the world's fastest growing telecom markets. Its attractive long-term prospects arise from growth in broadband, value-added services, and potential 3G services.
'Although the number of its fixed-line users declined in the third quarter, its revenue increased 2.7% due to the expansion of its broadband business and value-added services. Based on our estimate for fiscal year 2008 earnings per ADR, the stock is trading at 17.9x, which is slightly below the industry average.
Based on our estimate for fiscal year 2009 earnings per ADR, the stock is trading at 17x, which is also below the industry average. Using a P/E multiple of 18x our fiscal year 2008 earnings per ADR estimate yields a target price of $77.50, which we believe reflects the company's prospects. Thus, we maintain our Hold rating on the stock.'
Read the full analyst report on CHA.
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