Event:
China Unicom declared on Sep 24, 2008 that it increased holdings of 49,999,932 shares, or 0.23% of total equity; besides, the company intended to increase shares on behalf of the company or the group as a person in the coming 12 months with accumulatively additional holding of no more than 2% of total equity (including some of increased shares of this event).
Our analysis and estimation:
The action reflected confidence of large shareholders.
The company had increased holding of A-shares in 2H2008 and obtained benign earnings (probably ~RMB1.5bn), which strengthened confidence.
Future operation will develop with steady growth.
We objectively consider that the company’s integrity will last for one year while final effects are to be expected. Development and performance will enjoy steady growth in the coming two years, and large shareholders’ increasing holdings will enhance safety boundary of trading opportunities.
Earnings forecast and rating:
We forecast 2008-2010E revenue of the company to be Rmb154.024bn, Rmb155.562bn and Rmb157.264bn respectively, net profit of Rmb6.44729bn, Rmb6.235bn and Rmb6.187bn with EPS at Rmb0.304, Rmb0.294 and Rmb0.292. Maintain “Cautious” rating and fair estimation at Rmb6.