UBS believes that in an environment where interest rates peak in the Hong Kong telecommunications sector in 2024, dividends and valuations per share have the potential to rise.
The Zhitong Finance App learned that UBS released a research report saying that it believes 2024 will be the year when Hong Kong's telecommunications sector is re-rated. It believes that in an environment where interest rates peak, dividends and valuations per share have upward potential. It continues to be optimistic about HKT-SS (06823) rather than Hong Kong Broadband (01310), and believes that the former's business prospects are more flexible. At the same time, PCCW (00008) was given a “buy” rating, but the view is less positive compared to HKT because it is estimated that its non-HKT business's cash flow is still negative, which may require further sale of assets or capital raising to maintain 100% transmission of HKT's dividends.
Furthermore, the bank also reiterated its “buy” rating for HKT, indicating that in the previous interest rate reduction cycle in 2019, HKT's stock price outperformed the MSCI Hong Kong Index by about 10 percentage points. The current price is 8.5 percent higher than the predicted dividend rate for 2024, which is about 4% higher than the US 10-year Treasury interest rate. It is in line with the historical average, and there is room for revaluation after entering the interest rate reduction cycle, with a target price of HK$11.8, that is, there is room for increase of more than 25%.