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Comba:Widening loss in 1H13

时间:2013-08-27    机构:京华山一国际

What’s New

Due to resources reallocation, we hereby cease coverage of Comba.

Our View

Loss widened again in 1H13. Comba reported HK$151 mn netloss in 1H13, which narrowed from HK$161 mn net loss in 1H12 butwidened from HK$41 mn in 2H12. Revenue dropped 17% yoy toHK$2,162 mn and gross margin shrank 2.3 pts to 25.5%.

Dampened by teleco capex delay. As teleco held up capex in1H13, revenue from China Mobile/ Unicom/ China Telecomregistered 13%47%/8% decline. We concur there should be somebusiness recovery in 2H13F, as teleco shall release some capexspending.

Structural change in demand. Management commented that inthe past, wireless enhancement demand was driven by voice traffic,while currently market demand was led by voice plus data traffic. Ittakes time for Comba to develop new product portfolio to cater tothis structural change. Though management grasps the rightstrategic direction in small cell and DAS solution, the transitionperiod has not yet past.

Femtocell contribution more likely in FY14F. The recovery ofComba is reliant on Femtocell roll out by China Mobile. However,small cell solution is still in trial stage and significant contribution ismore likely in FY14F.

Valuation

We think Comba will struggle to breakeven this year. The Counter istrading at 1.0x P/B. Though the valuation is not demanding, it does notprovide enough safety margin for a recovery bet.