PCCW(00008) 市值风云·2024-07-04 11:01Investment Rating - The report does not explicitly mention an investment rating for the company [1][2][3] Core Viewpoints - The company, PCCW, has experienced significant market value erosion since the dot-com bubble burst, with its market cap dropping from a peak of HKD 580 billion to around HKD 30 billion [2] - PCCW's revenue growth has been stagnant, with a 10-year CAGR of only 1% from 2014 to 2023 [6] - The company has undergone significant business restructuring, focusing primarily on telecom and media, with telecom contributing 94% of revenue in 2023 [11] - PCCW's core telecom business, Hong Kong Telecom, is heavily reliant on fixed-line services, which are in a mature-to-decline phase, while mobile services are still in the early stages of 5G adoption [16][25][28] - The company has a strong dividend history, paying out HKD 27 billion in dividends over the past 5 years, representing 65% of its free cash flow [37][38] Business Overview - PCCW was founded in 1993 and became a major player in Hong Kong's telecom market after acquiring Hong Kong Telecom in 2000 for USD 35.9 billion [2] - The company's major shareholders include Li Ka-shing's son, Richard Li, who holds 24.92%, and China Unicom, which holds 18.41% [3][5] - PCCW's business segments have been streamlined, with telecom and media now accounting for 94% and 9% of revenue, respectively [11] - The company has divested several non-core assets, including Now TV and its property business, to focus on its core telecom operations [11] Financial Performance - PCCW's revenue in 2023 was HKD 36.3 billion, with Hong Kong Telecom contributing HKD 34.3 billion [15] - The company's EBITDA improved to HKD 12.8 billion in 2023, with an EBITDA margin of 35.3%, the highest in 5 years [33] - Capital expenditures have decreased significantly, from HKD 5 billion in 2019 to HKD 2.3 billion in 2023, contributing to improved free cash flow [34][36] - Free cash flow increased from HKD 6.1 billion in 2019 to HKD 11 billion in 2023 [36] Industry Analysis - Hong Kong's telecom market is highly competitive, with 28 licensed fixed-line operators and 4 major mobile operators [22][25] - Fixed-line penetration in Hong Kong remains high at 66.8%, compared to 13% in mainland China and 29% in the US [20] - The mobile market is saturated, with a penetration rate of 282%, and 5G adoption is still in its early stages, with 68.2% of mobile users on 5G as of March 2023 [26][28] - Hong Kong Telecom's mobile business is heavily reliant on hardware sales, with 26% of its mobile revenue coming from device sales in 2023 [30] Dividend and Shareholder Returns - PCCW has a strong track record of paying dividends, with HKD 27 billion paid out over the past 5 years [37] - The company's dividend payout ratio is 65% of its free cash flow, indicating a strong commitment to returning capital to shareholders [37] - For long-term investors, dividends have been a significant source of returns, with an annualized return of 15.75% from 2014 to 2023, assuming reinvestment of dividends [38]