Chunghwa Tops on Q1 Earnings, Revs Down - Analyst Blog

Chunghwa Telecom Co. Ltd. CHT declared mixed financial results for the first quarter of 2014. Quarterly total revenue came in at approximately $1,817 million, recording a drop of 2.8% year over year. The first-quarter 2014 net income came in at around $336.6 million, up a considerable 10.9% year over year.  Net earnings per ADR were 43 cents compared with 40 cents in the year-ago quarter.

Quarterly operating income stood at $392.7 million, up 5.9% year over year. Quarterly operating costs were $1,424 million, up 5.9% year over year. Operating margin was 21.6% compared with 19.8% in the year-ago quarter.

The first-quarter 2014 EBITDA was $668.9 million, up 13.7% year over year. Quarterly EBITDA margin came in at 36.8% against 34% in the prior-year quarter. During the reported quarter, Chunghwa generated around $320.1 million of cash from operations, up 13.7% year over year. Capital expenditure was around $190.4 million, down 23.4% year over year.

Segment wise Revenue

The Mobile Communications segment accounted for approximately $907.8 million of the total first-quarter 2014 revenue, down 1.4% year over year. The Internet segment contributed $202.3 million, up 1.9% year over year. The Domestic Fixed-line Communications segment recorded $566 million in revenues, down 5% year over year. The International Fixed-line Communications segment generated $125.4 million, down 0.5% year over year. Other Business registered the remaining $15.5 million, down 43.6% year over year.

In the first quarter of 2014, Handset sales revenues stood at $277.9 million, down 7.4% year over year. Internet VAS revenues were $22.1 million, up 3.3% year over year.  

Subscriber Statistics as of Mar 31, 2014

The total Broadband subscriber base was nearly 4.53 million, out of which the FTTx subscriber base was around 2.99 million, accounting for 66% of the total broadband subscriber base. 1.19 million Broadband subscribers signed up for 60Mbps or higher speed connections, up 23.2% year over year.  HiNet subscriber base was 3.78 million, up 0.1% year over year.

Mobile subscriber base stood at 10.78 million, up 4.1% year over year. Mobile Internet subscriber base was 4.29 million, up by a significant 49.5% year over year. Chunghwa currently commands 35.6% of the mobile Internet market share in Taiwan. In the reported quarter, the company added a net of 1.42 million mobile Internet subscribers. The International /Domestic Fixed-line subscriber base stood at 11.51 million.

Fiscal 2014 Financial Guidance

Total revenue in fiscal 2014 is estimated at NT$228.23 billion, up 0.1% year over year. Operating costs and expenses are projected to be NT$ 184.7 billion, up 2.4% year over year. Operating income is likely to be NT$ 43.53 billion, down 8.5% year over year. EBITDA is forecasted to be NT$ 77.1 billion, down 3.4% year over year. EBITDA margin is likely to be 33.8% compared with 35% in fiscal 2013. Earnings per share are projected to be NT$4.62, down 10.1% year over year.

Other Stocks to Consider

Currently, Chunghwa holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the telecom industry include Shenandoah Telecommunications Co. SHEN, BCE Inc. BCE and Nippon Telegraph and Telephone Corp. NTT. While Shenandoah carries a Zacks Rank #1 (Strong Buy), both Nippon and BCE have a Zacks Rank #2 (Buy).