China / Hong Kong Company Guide China Tower Version 1 | Bloomberg: 788 HK Equity | Reuters: 0788.HK Refer to important disclosures at the end of this report DBS Group Research . Equity 12 Jul 2019 BUY(Initiating Coverage) Final call to participate in 5G rally • Faster 5G rollout driving stronger demand for tower services Last Traded Price ( 11 Jul 2019):HK$2.14(HSI : 28,432) Price Target 12-mth:HK$3.10 (44.9% upside) • Increase of macro cells in BTS mix in FY20-21 will lead to stronger business growth Analyst • Expect continuous re-rating driven by stronger growth outlook Tsz-Wang TAM, CFA+852 36684195,
[email protected] and higher profitability Chris KO CFA,+852 36684172,
[email protected] • Initiating coverage with BUY rating and a TP of HK$3.1 for re- Price Relative rating potential and 5G beneficiary Largest tower company benefiting from 5G rollout in China. China Tower is the largest tower company in China with a market share of 96%. We are initiating coverage with a BUY rating as China Tower will benefit from stronger demand for tower services driven by acceleration of 5G rollout and increase of macro cells in base transceiver station (BTS) mix in FY20-21. Where we differ. Increase of macro cells in BTS mix. In FY19, telecom operators are focusing on 4G network optimisation which Forecasts and Valuation utilises more small cells and distributive antenna systems (DAS) in FY Dec (RMBm) 2018A 2019F 2020F 2021F Turnover 71,819 78,081 87,633 97,459 the mix of BTS. China Tower has a smaller market share in these EBITDA 41,926 46,218 52,467 59,113 two products.