China telco with low debt/equity relative to typical telco.
Free cash flow generation is good with low dividend payout ratio indicating future potential for higher dividend payout.
Share price is beaten till its multi-year lows.
CAPEX to invest on mobile network and other necessary infrastructure is largely financed from FCF instead of debt indicating prudent management and sustainability.
2018 finance income is larger than interest cost. If dont consider finance income, the interest coverage on net profit basis is 6x, 50x on OP Cash basis and 25x on FCF basis. This indicates business has little liquidity risk as it can largely finance its debt.
Long term bank loan is 3B RMB and short term bank loan is 15B RMB + corporate bond of 16B RMB versus cash balance of 30B RMB. The bonds will expire in 2019. There are some liquidity strain if company cannot find cash to pay off the bonds.
Annual dividend payout is 4.1B indicates very low payout ratio at current yield of <2%. Room for future increase is high.
Company actively paydown debt leading to lower debt.equity ratio and lower finance cost with better interest coverage ratio.
Free cash flow is 40B per year vs short term loan of 15B. In terms ability to repay debt, the company is in good shape, they can repay debt easily even after paying the dividends.
Currently is undervalued by not deep enough. Wait until beyond 30%. discount.
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