TS Telecom Technologies Ltd. (May 9, 2000)



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Key Data

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GEM stock code

: 8003

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52 week H/L

: $2.6/$1.11

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Current price

: $1.14

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No of issued shares

: 264,000,000

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Market cap

: 303.6m

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Estimated P/E

: (00/7.6x) (01/4.8x)

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Estimated EPS

: (00/$0.156) (01/$0.25)

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Recommendation

: Buy

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12 month Target

: $2.00

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Highlights

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The group is a market leader in power monitoring system and cable monitoring system for telecommunication networks in the PRC, Hong Kong and Macau.

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The groups products accounted for 80% to 100% of market shares in the Greater China region.

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New products Fibersmart, Mobile Base Powercom Station and Gas Turbine Generator are competitive edges and strong earning contributors.

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More project contracts are in negotiation in the PRC and the newly developed South East Asia countries and market potential is huge in this area.

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Highly promising outlook for future growth

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The telecommunication industry is undergoing rapid development in Asia-pacific region. Fast expansion and extension of cable networks guarantee the demand for the groups products, as monitoring system is a need for reliable services provided by Telecom operators. We are confident that both the revenue and earnings to grow at a two year CAGR of average 60% from 2000 to 2002, apart from an approximate four fold surge in net earning from FY1999 to FY2000 due to revenue coming from sale of new products with high profit margin.

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As an early mover, the group occupies significant market shares in major cities in China including Beijing, Shanghai and Guangzhou and in Hong Kong. Successful vertical integration process enables new products to enjoy high gross margins at above 50%.

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Amiable relationship with municipal governments in the PRC will enable the group to secured more project and service contracts from more cities in the future. The South East Asia markets such as Malaysia, Indonesia, Korea and Singapore, are successfully taped by the group and several contracts worth HK$ 500 m with gross margin at least 25% are to be confirmed in Indonesia in short term.

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The group has also prepared to develop the broadband fibre-optics market. In June 2000, the Broadband Integrating System business will initially be launched in Beijing and Shanghai and the business is expected to be highly value-added to its products and is well positioned the Group to penetrate into the new arena of business.

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The Group will continuously introduce new products through its R & D Efforts in order to meet new challenges and market needs. In addition, the Group will also gear up its marketing scale as an attempt to capitalize on its technological success and as a well-established market leader.

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New Products

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Fibersmart is a new product in cable monitoring system using to detect problems occurred in the fibre-optics cables and Mobile Base Powercom is a smart and sophisticated condensed unit to be located in individual power points to pin point troubles of the network lines. Both of products are well demanded by the telecom service providers in China and gross margin is 40% for Fibersmart and 65% for the Mobile Base Powercom. Furthermore, a new generation turbine power generator has been successfully launched to market targeted telecom industry and military purposed. This new product is specially designed to substitute the old generation spare generator, which possessed some defects that have been improved in the new turbine generator. Sales of the product are optimistic and gross margin is over 50% on US 1 m/unit retail price.

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Earning Forecast

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Year ended 31st March (HK$m)

1999A

2000E

2001E

2002E

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Turnover

107.6

97

165

247

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Net Profit

11.1

41

65.6

98.4

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EPS (cents)

6.01

15.68

25

37.5

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PER (based on current price $)

20

7.6

4.8

3.2

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