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Chunghwa Telecom Hits New 52-Week High: What's Driving it?

Zacks Equity Research
Updated

Shares of Chunghwa Telecom Co. Ltd. CHT scaled a new 52-week high of $38.59 during the trading session on Mar 28. However, the stock closed a tad lower at $38.49, up 1.05% from the closing price of Mar 27.

In fact, the stock has performed pretty well in the past six months. Shares of Chunghwa Telecom have gained 13.8%, against its industry’s decline of 9.4% in the said time frame.

 

Catalysts Behind the Upside

Chunghwa Telecom is one of the largest telecommunications services company in Taiwan that provides fixed-line, mobile, broadband and Internet services. The telco continues to dominate the Taiwanese telecom market with its presence in 80% of the broadband market and 35% of the wireless market. It further intends to raise its market share in the 4G market in Taiwan to 40%. At the end of 2017, the 4G wireless subscribers base was 7.99 million.

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Chunghwa Telecom reported impressive financial results for fourth-quarter 2017. Both earnings per share and revenues improved on a year-over-year (y/y) basis. Growth was witnessed across all segments

Further, the company continues to expand its subscriber base on the back of fiber-based high-speed next-generation FTTx (fiber to the home/building) offerings. The company is investing heavily to build a formidable FTTx network in Taiwan. As of Dec 31, 2017, total broadband subscriber base was more than 4.46541 million, of which FTTx subscriber base accounted for 79.5%, with around 3.55 million subscribers. Broadband subscribers signing up for 100 Mbps or higher speed connections were more than 1.28 million, up 9.5% year over year. 

The company also offers large-scale fiber-to-the-home (FTTH) and fiber-to-the-building (FTTB) access infrastructure to 75% of Taiwan’s population. The growing demand for smartphones, which enjoy significant market penetration, acted as a tailwind. In fourth-quarter 2017, mobile Internet subscriber base was 7.35 million (up 7.2% y/y). The International /Domestic Fixed-line subscriber base was 10.69 million.

Moreover, the company has inked a strategic deal with Nokia Corporation NOK to jointly build 5G trial network at designated sites in 2018 and 2019 in Taiwan. The combination of Nokia’s technologies and Chunghwa Telecom’s solid R&D capabilities will give Taiwan an upper hand in 5G development.

The company also provides information and communication technology services to corporate customers and is expanding its cloud computing services.

Other Bullish Readings

ROC

Return on Capital (ROC) of Chunghwa Telecom is 10.5% compared with 5.7% for the industry. This implies that the company generates a higher return on investment than its industry.

Debt-to-Equity Ratio

Chunghwa Telecom is not a highly leveraged stock with a reading of 0.4% compared with 133.3% for the industry. The debt-to-equity ratio is a good indicator of the financial well-being of a company.

Zacks Rank & Stocks to Consider

Currently, Chunghwa Telecom is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Utilities sector are Shenandoah Telecommunications Co SHEN and Telefonica SA TEF. While Shenandoah sports a Zacks Rank #1, Telefonica carries a Zacks Rank #2 (Buy).

Sales for Shenandoah and Telefonica are estimated to rise 3.8% and 4.3%, respectively, for full-year 2018.

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Nokia Corporation (NOK) : Free Stock Analysis Report
 
Telefonica SA (TEF) : Free Stock Analysis Report
 
Chunghwa Telecom Co., Ltd. (CHT) : Free Stock Analysis Report
 
Shenandoah Telecommunications Co (SHEN) : Free Stock Analysis Report
 
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