Intrinsic value of China Unicom (Hong Kong) ADR - CHU

Previous Close

$12.10

  Intrinsic Value

$0.34

stock screener

  Rating & Target

str. sell

-97%

Previous close

$12.10

 
Intrinsic value

$0.34

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of CHU stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -1.03
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  39,669
  40,271
  41,197
  42,256
  43,444
  44,761
  46,206
  47,780
  49,484
  51,319
  53,288
  55,395
  57,643
  60,037
  62,581
  65,281
  68,142
  71,170
  74,372
  77,756
  81,329
  85,099
  89,074
  93,265
  97,680
  102,330
  107,226
  112,380
  117,803
  123,508
  129,509
Variable operating expenses, $m
 
  24,282
  24,840
  25,477
  26,193
  26,986
  27,856
  28,803
  29,828
  30,933
  32,119
  33,347
  34,701
  36,142
  37,673
  39,298
  41,021
  42,844
  44,771
  46,808
  48,959
  51,228
  53,622
  56,144
  58,802
  61,602
  64,549
  67,651
  70,916
  74,350
  77,963
Fixed operating expenses, $m
 
  15,967
  16,318
  16,677
  17,044
  17,419
  17,802
  18,194
  18,594
  19,003
  19,421
  19,848
  20,285
  20,731
  21,187
  21,653
  22,130
  22,617
  23,114
  23,623
  24,143
  24,674
  25,216
  25,771
  26,338
  26,918
  27,510
  28,115
  28,734
  29,366
  30,012
Total operating expenses, $m
  39,279
  40,249
  41,158
  42,154
  43,237
  44,405
  45,658
  46,997
  48,422
  49,936
  51,540
  53,195
  54,986
  56,873
  58,860
  60,951
  63,151
  65,461
  67,885
  70,431
  73,102
  75,902
  78,838
  81,915
  85,140
  88,520
  92,059
  95,766
  99,650
  103,716
  107,975
Operating income, $m
  390
  22
  39
  101
  208
  357
  549
  783
  1,061
  1,382
  1,748
  2,200
  2,658
  3,164
  3,721
  4,329
  4,991
  5,710
  6,487
  7,325
  8,227
  9,196
  10,236
  11,349
  12,539
  13,811
  15,167
  16,613
  18,153
  19,792
  21,534
EBITDA, $m
  11,502
  6,988
  7,165
  7,409
  7,720
  8,096
  8,536
  9,041
  9,612
  10,249
  10,954
  11,727
  12,572
  13,491
  14,485
  15,557
  16,712
  17,951
  19,279
  20,699
  22,216
  23,833
  25,557
  27,391
  29,340
  31,412
  33,610
  35,943
  38,415
  41,035
  43,810
Interest expense (income), $m
  714
  1,381
  1,446
  1,516
  1,597
  1,688
  1,788
  1,898
  2,018
  2,148
  2,288
  2,439
  2,599
  2,771
  2,953
  3,147
  3,353
  3,572
  3,803
  4,047
  4,305
  4,577
  4,865
  5,168
  5,488
  5,825
  6,179
  6,553
  6,946
  7,360
  7,795
Earnings before tax, $m
  113
  -1,359
  -1,407
  -1,415
  -1,389
  -1,331
  -1,239
  -1,115
  -957
  -766
  -540
  -239
  58
  393
  767
  1,182
  1,638
  2,138
  2,684
  3,278
  3,922
  4,619
  5,371
  6,181
  7,052
  7,986
  8,988
  10,060
  11,207
  12,432
  13,739
Tax expense, $m
  22
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  16
  106
  207
  319
  442
  577
  725
  885
  1,059
  1,247
  1,450
  1,669
  1,904
  2,156
  2,427
  2,716
  3,026
  3,357
  3,710
Net income, $m
  90
  -1,359
  -1,407
  -1,415
  -1,389
  -1,331
  -1,239
  -1,115
  -957
  -766
  -540
  -239
  43
  287
  560
  863
  1,196
  1,561
  1,959
  2,393
  2,863
  3,372
  3,921
  4,512
  5,148
  5,830
  6,561
  7,344
  8,181
  9,075
  10,030

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,691
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  88,851
  90,293
  92,370
  94,744
  97,409
  100,362
  103,602
  107,130
  110,950
  115,064
  119,480
  124,204
  129,245
  134,613
  140,317
  146,369
  152,784
  159,574
  166,754
  174,341
  182,351
  190,804
  199,718
  209,114
  219,013
  229,440
  240,418
  251,973
  264,132
  276,923
  290,378
Adjusted assets (=assets-cash), $m
  85,160
  90,293
  92,370
  94,744
  97,409
  100,362
  103,602
  107,130
  110,950
  115,064
  119,480
  124,204
  129,245
  134,613
  140,317
  146,369
  152,784
  159,574
  166,754
  174,341
  182,351
  190,804
  199,718
  209,114
  219,013
  229,440
  240,418
  251,973
  264,132
  276,923
  290,378
Revenue / Adjusted assets
  0.466
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
Average production assets, $m
  67,098
  69,265
  70,859
  72,680
  74,724
  76,990
  79,475
  82,182
  85,112
  88,268
  91,656
  95,280
  99,147
  103,264
  107,640
  112,283
  117,204
  122,412
  127,920
  133,740
  139,885
  146,369
  153,207
  160,415
  168,009
  176,008
  184,429
  193,293
  202,621
  212,434
  222,755
Working capital, $m
  -37,678
  -29,357
  -30,032
  -30,804
  -31,671
  -32,631
  -33,685
  -34,832
  -36,074
  -37,411
  -38,847
  -40,383
  -42,022
  -43,767
  -45,622
  -47,590
  -49,675
  -51,883
  -54,217
  -56,684
  -59,289
  -62,037
  -64,935
  -67,990
  -71,209
  -74,599
  -78,168
  -81,925
  -85,878
  -90,037
  -94,412
Total debt, $m
  25,354
  26,770
  28,078
  29,574
  31,253
  33,113
  35,155
  37,378
  39,784
  42,376
  45,158
  48,134
  51,310
  54,691
  58,285
  62,098
  66,139
  70,417
  74,940
  79,720
  84,767
  90,092
  95,708
  101,627
  107,864
  114,432
  121,349
  128,628
  136,288
  144,347
  152,824
Total liabilities, $m
  55,952
  56,885
  58,193
  59,688
  61,367
  63,228
  65,269
  67,492
  69,898
  72,491
  75,273
  78,249
  81,425
  84,806
  88,399
  92,213
  96,254
  100,531
  105,055
  109,835
  114,881
  120,206
  125,822
  131,742
  137,978
  144,547
  151,463
  158,743
  166,403
  174,462
  182,938
Total equity, $m
  32,899
  33,408
  34,177
  35,055
  36,041
  37,134
  38,333
  39,638
  41,051
  42,574
  44,208
  45,956
  47,821
  49,807
  51,917
  54,157
  56,530
  59,042
  61,699
  64,506
  67,470
  70,597
  73,896
  77,372
  81,035
  84,893
  88,955
  93,230
  97,729
  102,462
  107,440
Total liabilities and equity, $m
  88,851
  90,293
  92,370
  94,743
  97,408
  100,362
  103,602
  107,130
  110,949
  115,065
  119,481
  124,205
  129,246
  134,613
  140,316
  146,370
  152,784
  159,573
  166,754
  174,341
  182,351
  190,803
  199,718
  209,114
  219,013
  229,440
  240,418
  251,973
  264,132
  276,924
  290,378
Debt-to-equity ratio
  0.771
  0.800
  0.820
  0.840
  0.870
  0.890
  0.920
  0.940
  0.970
  1.000
  1.020
  1.050
  1.070
  1.100
  1.120
  1.150
  1.170
  1.190
  1.210
  1.240
  1.260
  1.280
  1.300
  1.310
  1.330
  1.350
  1.360
  1.380
  1.390
  1.410
  1.420
Adjusted equity ratio
  0.386
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370
  0.370

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  90
  -1,359
  -1,407
  -1,415
  -1,389
  -1,331
  -1,239
  -1,115
  -957
  -766
  -540
  -239
  43
  287
  560
  863
  1,196
  1,561
  1,959
  2,393
  2,863
  3,372
  3,921
  4,512
  5,148
  5,830
  6,561
  7,344
  8,181
  9,075
  10,030
Depreciation, amort., depletion, $m
  11,112
  6,966
  7,126
  7,308
  7,512
  7,739
  7,987
  8,258
  8,551
  8,867
  9,205
  9,528
  9,915
  10,326
  10,764
  11,228
  11,720
  12,241
  12,792
  13,374
  13,989
  14,637
  15,321
  16,042
  16,801
  17,601
  18,443
  19,329
  20,262
  21,243
  22,276
Funds from operations, $m
  9,277
  5,607
  5,719
  5,893
  6,123
  6,408
  6,748
  7,143
  7,594
  8,101
  8,665
  9,289
  9,957
  10,614
  11,324
  12,091
  12,916
  13,802
  14,751
  15,767
  16,852
  18,009
  19,242
  20,554
  21,949
  23,431
  25,004
  26,673
  28,443
  30,319
  32,305
Change in working capital, $m
  -1,515
  -576
  -675
  -772
  -867
  -960
  -1,054
  -1,147
  -1,242
  -1,338
  -1,436
  -1,536
  -1,639
  -1,745
  -1,855
  -1,968
  -2,086
  -2,208
  -2,335
  -2,467
  -2,604
  -2,748
  -2,898
  -3,055
  -3,219
  -3,390
  -3,569
  -3,757
  -3,953
  -4,159
  -4,375
Cash from operations, $m
  10,792
  6,183
  6,394
  6,665
  6,989
  7,368
  7,802
  8,290
  8,836
  9,439
  10,101
  10,825
  11,596
  12,359
  13,179
  14,059
  15,002
  16,010
  17,086
  18,234
  19,456
  20,757
  22,140
  23,608
  25,167
  26,821
  28,573
  30,430
  32,397
  34,478
  36,680
Maintenance CAPEX, $m
  0
  -6,791
  -6,927
  -7,086
  -7,268
  -7,472
  -7,699
  -7,948
  -8,218
  -8,511
  -8,827
  -9,166
  -9,528
  -9,915
  -10,326
  -10,764
  -11,228
  -11,720
  -12,241
  -12,792
  -13,374
  -13,989
  -14,637
  -15,321
  -16,042
  -16,801
  -17,601
  -18,443
  -19,329
  -20,262
  -21,243
New CAPEX, $m
  -14,812
  -1,355
  -1,593
  -1,821
  -2,044
  -2,265
  -2,486
  -2,707
  -2,930
  -3,156
  -3,388
  -3,624
  -3,867
  -4,117
  -4,376
  -4,643
  -4,921
  -5,209
  -5,508
  -5,820
  -6,145
  -6,484
  -6,838
  -7,208
  -7,594
  -7,998
  -8,421
  -8,864
  -9,327
  -9,813
  -10,322
Cash from investing activities, $m
  -13,852
  -8,146
  -8,520
  -8,907
  -9,312
  -9,737
  -10,185
  -10,655
  -11,148
  -11,667
  -12,215
  -12,790
  -13,395
  -14,032
  -14,702
  -15,407
  -16,149
  -16,929
  -17,749
  -18,612
  -19,519
  -20,473
  -21,475
  -22,529
  -23,636
  -24,799
  -26,022
  -27,307
  -28,656
  -30,075
  -31,565
Free cash flow, $m
  -3,060
  -1,963
  -2,125
  -2,242
  -2,323
  -2,370
  -2,383
  -2,364
  -2,312
  -2,229
  -2,113
  -1,965
  -1,799
  -1,673
  -1,523
  -1,348
  -1,147
  -919
  -663
  -378
  -63
  284
  665
  1,080
  1,532
  2,021
  2,551
  3,123
  3,740
  4,403
  5,115
Issuance/(repayment) of debt, $m
  3,756
  1,197
  1,308
  1,496
  1,679
  1,860
  2,041
  2,223
  2,406
  2,592
  2,782
  2,976
  3,176
  3,381
  3,594
  3,813
  4,041
  4,278
  4,524
  4,780
  5,047
  5,325
  5,616
  5,919
  6,237
  6,569
  6,916
  7,280
  7,660
  8,059
  8,477
Issuance/(repurchase) of shares, $m
  0
  2,024
  2,175
  2,293
  2,376
  2,424
  2,438
  2,420
  2,370
  2,288
  2,174
  1,987
  1,822
  1,699
  1,550
  1,377
  1,178
  951
  697
  414
  101
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3,899
  3,221
  3,483
  3,789
  4,055
  4,284
  4,479
  4,643
  4,776
  4,880
  4,956
  4,963
  4,998
  5,080
  5,144
  5,190
  5,219
  5,229
  5,221
  5,194
  5,148
  5,325
  5,616
  5,919
  6,237
  6,569
  6,916
  7,280
  7,660
  8,059
  8,477
Total cash flow (excl. dividends), $m
  861
  1,258
  1,358
  1,547
  1,732
  1,914
  2,097
  2,279
  2,464
  2,652
  2,843
  2,999
  3,200
  3,407
  3,621
  3,842
  4,071
  4,310
  4,558
  4,816
  5,084
  5,610
  6,281
  6,999
  7,768
  8,590
  9,467
  10,403
  11,400
  12,462
  13,592
Retained Cash Flow (-), $m
  552
  -2,024
  -2,175
  -2,293
  -2,376
  -2,424
  -2,438
  -2,420
  -2,370
  -2,288
  -2,174
  -1,987
  -1,865
  -1,986
  -2,111
  -2,240
  -2,373
  -2,512
  -2,657
  -2,807
  -2,964
  -3,127
  -3,298
  -3,476
  -3,663
  -3,858
  -4,062
  -4,275
  -4,499
  -4,733
  -4,978
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -766
  -817
  -747
  -644
  -509
  -342
  -141
  94
  363
  669
  1,012
  1,334
  1,421
  1,510
  1,602
  1,698
  1,797
  1,901
  2,008
  2,121
  2,482
  2,982
  3,523
  4,105
  4,732
  5,406
  6,128
  6,901
  7,729
  8,613
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  -722
  -723
  -616
  -492
  -358
  -219
  -82
  49
  169
  275
  363
  413
  376
  337
  298
  259
  222
  187
  155
  126
  112
  99
  85
  71
  57
  44
  33
  24
  17
  11
Current shareholders' claim on cash, %
  100
  99.3
  98.6
  97.8
  97.1
  96.4
  95.7
  95.0
  94.3
  93.7
  93.2
  92.7
  92.3
  92.0
  91.6
  91.4
  91.1
  91.0
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8
  90.8

China Unicom (Hong Kong) Limited is a Hong Kong-based investment holding company principally engaged in the provision of telecommunications services. The Company's businesses include mobile businesses, fixed-line businesses and others. Its mobile businesses include the provision of call services, roaming services, mobile broadband services, traditional value-added services such as short message services, multimedia message services and wireless Internet access card, as well as new value-added services such as mobile music, mobile television and Wo portal services. Its fixed-line businesses include broadband and Internet networks businesses, among others. The Company's subsidiaries include CUCL, China Unicom Global Limited and China Unicom (Europe) Operations Limited.

FINANCIAL RATIOS  of  China Unicom (Hong Kong) ADR (CHU)

Valuation Ratios
P/E Ratio 3219.5
Price to Sales 7.3
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 26.8
Price to Free Cash Flow -72.1
Growth Rates
Sales Growth Rate -1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.1%
Cap. Spend. - 3 Yr. Gr. Rate 5.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 17.8%
Total Debt to Equity 77.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.1%
Return On Equity 0.3%
Return On Equity - 3 Yr. Avg. 3.4%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 52%
Gross Margin - 3 Yr. Avg. 57.4%
EBITDA Margin 30.1%
EBITDA Margin - 3 Yr. Avg. 32.6%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 4.9%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 3.6%
Net Profit Margin 0.2%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 19.5%
Eff/ Tax Rate - 3 Yr. Avg. 22.8%
Payout Ratio 654.4%

CHU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHU stock intrinsic value calculation we used $39481 million for the last fiscal year's total revenue generated by China Unicom (Hong Kong) ADR. The default revenue input number comes from 2016 income statement of China Unicom (Hong Kong) ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CHU stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6%, whose default value for CHU is calculated based on our internal credit rating of China Unicom (Hong Kong) ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of China Unicom (Hong Kong) ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CHU stock the variable cost ratio is equal to 60.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15623 million in the base year in the intrinsic value calculation for CHU stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for China Unicom (Hong Kong) ADR.

Corporate tax rate of 27% is the nominal tax rate for China Unicom (Hong Kong) ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CHU stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CHU are equal to 172%.

Life of production assets of 10 years is the average useful life of capital assets used in China Unicom (Hong Kong) ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CHU is equal to -72.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $32744 million for China Unicom (Hong Kong) ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 23947 million for China Unicom (Hong Kong) ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of China Unicom (Hong Kong) ADR at the current share price and the inputted number of shares is $289.8 billion.

RELATED COMPANIES Price Int.Val. Rating
CHL China Mobile A 43.95 9.74  str.sell
TEF Telefonica ADR 8.69 42.48  str.buy

COMPANY NEWS

▶ [$$] China Shakes Up Telecom Leadership Ahead of 5G Rollout   [Jul-20-18 07:13AM  The Wall Street Journal]
▶ Are the Bears or Bulls Right About China Mobile?   [Jun-29-18 02:00PM  Motley Fool]
▶ Sohu.com Stock Is a Missed Opportunity at Best   [Jun-25-18 11:41AM  InvestorPlace]
▶ 4 Tariff-Proof Chinese Stocks to Consider   [Jun-18-18 09:48AM  InvestorPlace]
▶ As Markets Open, China Volatility A Possibility In Regional Markets   [Jun-15-18 07:55AM  Emerging Market Views]
▶ BRIEF-China Unicom Hong Kong Updates on Dividend   [May-11-18 05:27AM  Reuters]
▶ Put China Mobile in Your Pocket   [Mar-26-18 07:00AM  Morningstar]
▶ How China Unicom is Benefiting From Revamp   [Mar-14-18 11:29PM  Bloomberg Video]
▶ BRIEF-China Unicom Hong Kong Issues Profit Alert   [Mar-01-18 05:54AM  Reuters]
▶ China Mobile Ltd. (ADR) is Too Cheap to Ignore   [Jan-03-18 01:00PM  Motley Fool]
▶ China Unicom Triumphs "World's Best Annual Report"   [Oct-27-17 02:00AM  PR Newswire]
▶ Apple Watch Hits Cellular Snag in China   [06:43AM  The Wall Street Journal]
▶ Ericsson: Capitalizing on Chinas Appetite for Mobile Video   [Oct-09-17 09:12AM  Market Realist]
▶ [$$] China Mobile Looks Cheap, but There's a Catch   [Oct-07-17 12:09AM  Barrons.com]
▶ 3 High-Yield Stocks for Retirees   [Oct-02-17 03:29PM  Motley Fool]
▶ A National Service Discount   [12:46AM  Bloomberg]
▶ China Unicom Surges on $11.7 Billion Share Sale   [Aug-20-17 10:39PM  Barrons.com]
▶ Uber Gets a China Ride It Can't Cancel   [02:44AM  Bloomberg]
▶ Unicom Isn't Cheap at Twice the Price   [02:20AM  Bloomberg]
▶ Mixed ownership reform at China Unicom   [12:46AM  CNBC Videos]
▶ China Begins Privatization Push   [12:04AM  Bloomberg Video]
▶ China Shows How Not to Sell $11.7 Billion in Shares   [Aug-16-17 11:17PM  Bloomberg]
▶ China's Internet Giants Heed Unicom Call   [Jul-24-17 09:32PM  Bloomberg]
▶ Where to Find Value in Chinese Stocks   [Jul-20-17 09:23PM  Barrons.com]
▶ China Unicom's Ivory Tower   [Jul-06-17 12:37AM  Bloomberg]
▶ [$$] Chinese telecoms: G forces   [Jun-27-17 10:31AM  Financial Times]
▶ Why We Remain Bullish On China Telecom   [Jun-01-17 01:48PM  Forbes]
▶ Matthews China Fund Seeks Gains in Tech Sector   [May-18-17 03:49PM  GuruFocus.com]
▶ China Unicom Voted "Asia's Best Management Team"   [May-10-17 06:08AM  PR Newswire]
Financial statements of CHU
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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