City Telecom HK Ltd (CTEL)

[solarity]

This post from Crossy at Silicon Investor is full of good info about the prospects of CTEL:

re: City Telecom H.K. (Nasdaq ADR): CTEL $6.32

I recently took some time to research "Rule-breaking" (Next-generation) telecom firms. Well ... looks like the more interesting telecom opportunities according to this theme are all located in Asia, the best among them most probably City Telecom ADR in HongKong. Ticker is "CTEL" on the Nasdaq, trading around $6. One US listed ADR (Nasdaq) ist the equivalent of 20 odinary shares (1137.HK)

http://finance.yahoo.com/q/cq?d=v1&s=ctel%201137.hk

They are the top challenger to the incumbent PCCW. And unlike the debt-ridden, hyperthrophic incumbent firm, CTEL has a lit (!) FTTH network, captive fiber assets already spanning more than 1.5 Million homes (passed) and connecting 1500 businesses. The network is already built out 70%.

http://finance.yahoo.com/q/pr?s=CTEL

They are profitable, FREE (!) cashflow positive, pay a small dividend and are the fastest growing Internet/Telecom firm in HongKong. Last year, they outflanked the legacy cable operator called "i-Cable" and now hold the #2 spot among HK broadband firms.

http://finance.yahoo.com/q/ks?s=CTEL

The metrics are nothing but astounding IMHO. Marketcap around $200m. They bought back most of their debt (8.75% senior notes) for a discount during the financial crisis to the point that they are now net-debt free.

Right now their PSR around 1, PE of 9, EBITDA Margin around 30% (and growing) EV/EBITDA below 4 They are fiber-only and their HK network is called "HKBN" (HongKong Broadband NEtwork). A repicable business model for sure that might apply to many densely populated areas.(They might branch out into partnerships to develop similar FTTH networks in different cities, especially in Asia)

http://www.ctihk.com/index_e.html
http://www.ctigroup.com.hk/en/about.html
http://www.ctigroup.com.hk/en/investors/2009/090525%20Presentation.pdf
http://reg.hkbn.net/ctigroup_admin/files_upload/9-1-09%20CTEL%20Rodman%20Confe.pdf
http://reg.hkbn.net/ctigroup_admin/files_upload/090831%20CTEL%20Rodman%20Renshaw.pdf

Their pricing of service just makes me envious, either.
US $30 .. gets you 25Mbit/symmetric bandwidth + Digital TV (IPTV)
US $ 60 gets you 100Mbit bandwidth
US $380 gets you a a Gigabit of bandwidth .. SYMMETRIC !

They have a FTTH based asset mix, that the incumbent PCCW is unable to match. This means they can offer better and more comprehensive service than the incumbent with its legacy copper assets is able to. Plus they are not burdened with high-opex legacy assets (light local exchanges and copper plant)

If CTEL was valued according to European fiber based ALTNETS, it should be trading at 3 times its current valuation. Due to this, plus the embedded growth from an enlarged footprint and bigger scope, I believe they are in for a 3 to 5 - bagger over the next couple of years.

Right now they have a 5% market share in the HongKong IP service market "cake" If this gets towards their targeted 30% by 2016 (a realistical assumption) then they may be in for even more.

rgrds,
CROSSY