During our roadshow in the US, we found that there was strong interest in small cap, higher-growth telcos, especially tower companies. However, interest in the large-cap, high dividend yield stocks has waned. We remain Neutral on the sector.
Our top picks are M1 and Telkom Indonesia. We also like SK Telecom and Thaicom. Our top sells include Telstra, Idea and XL Axiata. We recently downgraded both Tower Bersama and Jasmine to Neutral ratings as they have reached our target prices.
What We Think
Interest remains strong in the telco space, especially for growth ideas. Investors are prepared to consider liquid small cap stocks (less than US$2bn). Not surprisingly, interest in dividend yield stocks has waned.
What You Should Do
Stay invested in M1 and Telkom Indonesia. We also like Thaicom and SK Telecom. (Read Report)
Source : CIMB Research