注資陸續來 １８８３抵炒

1616連穿10、20天線

中信集團電訊旗艦中信1616（1883）昨大升0.22元或8.94%至2.68元，近期調整應已完成，又屆上車之時。

1616自9月中起營造三角形，10月底跌破後，月來已跌足三角形量度跌幅，近日在2.50元附近始找到支持，昨以大陽燭突破短期降軌，並一舉升破10日線（2.52元）及20日線（2.58元），剛觸及50日線（2.68元），100日線快將升破250日線，出現黃金交叉，MACD重現牛差，有利後市，可現價買入，短炒以2.90元作目標，失守10日線止蝕。

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Quoted & Summarized from SBI Securities

 Target revised up to HK$3.26, thanks to contribution of CEC acquisition.
Reiterate BUY.

Acquires China Enterprise Communications (CEC). In line with our M&A growth
hypothesis, CITIC 1616 announced a HK$258m acquisition from its ultimate
shareholder CITIC Group and proposed a change in company name to “CITIC
Telecom International”. The asset to be acquired is 49% equity interest of CEC and 100% of CEC-HK, which is a leading IP-VPN (internet protocol-virtual private network) services provider in China, being one of the few licensees in China.

The consideration is to be paid by HK$187.6m in cash, and the company is to assume US$9.1m debt to controlling shareholder. Management indicated that the price-to-sales ratio is 1.55x based on 2009 sales, of which 2009 was the first year CEC-HK (the operation unit) began to make profit of HK$4.5m. Upon completion of the transaction, CITIC 1616 also will be granted a 10-year call option for the additional 45.1% equity interest in CEC.

Valuation for the acquisition at 9.8x P/E for 2010F. For 2009A, sales and netprofit of CEC-HK was RMB154.4m and RMB4.5m, which represented a net margin of 2.9% for its first profitable year. With net margin expected to normalize to 15%, potential attributable profit is RMB23m. Since the transaction is to complete most likely in Q4, we ignore synergies and sales growth for 2010. As such, the total consideration of HK$258m is equivalent to 9.8x FY12/10F P/E for CEC-HK based on HK$1.1454 for RMB1. We believe the price for the acquisition is fair in short-term valuation but the acquisition is largely positive for medium to longer term. We expect
more synergies to emerge in 2011, which boost a high growth for next year, followed by market growth from 2012 onwards, which is reflected in our revised model.

In our view, there is low execution risk as CITIC 1616 has in the past repeatedly demonstrated their ability to merge acquired assets into the fold. CEC-HK has VPN access in China and limited overlap with existing operations. CITIC 1616 did not own the required license to run VPN business in China. Instead, prior to the acquisition, fully-owned subsidiary CPCNet to own a minority stake in China VPN operations. CPCNet had exposure to the around one-third market share in VPN market in China. Its service fee is 30% to 40% higher than China Unicom and China Telecom, the remaining 2 major operators, due to CITIC 1616‟s focus on the higher-end market. Upon acquiring CEC, CITIC 1616 owned the required license
and lower-to-mid end client base. We believe CEC has reached a critical mass and is supposed to realize cost saving in 2011 upon its merge with CPCNet. From 2012 onwards, we expect CITIC 1616 could realize strong growth with exposure to both high-end and low-end market VPN market in China.

CITIC’s repositioning. We believe CITIC 1616 would likely re-position itself after changing its name. Its new name and logo are intended to reflect the company‟s role as key telecom business investment platform overseas for CITIC Group. As a platform, the company may leverage on M&A opportunities from CITIC Group. CITIC Group has telecom operations such as telecom licenses, transmission network and content providers, to name a few.