This is the one of the analyst I follow, but this time I will skip loh.
Buying shares of Green Packet
We are buying 10,000 shares of Green Packet at Friday's closing price of RM1.19 per share. This will increase our portfolio's equity weightage to 79%, a level which we are still comfortable with. After this purchase, we still have substantial surplus cash of RM115,915 for future investments.
Although Green Packet is expected to remain in the red in the near term, we are sanguine that increasing coverage and subscribers will gradually pare losses for the company's WiMAX broadband business, housed under P1.
The turnaround — likely in 2H10 — should be a catalyst for an upward rerating for the stock. Once the company achieves critical mass in terms of subscriber numbers, earnings are expected to grow rapidly and strongly on the back of increasing economies of scale.
Broadband penetration rate in the country, still low compared to neighbouring Singapore, is expected to keep rising. The government's decision to provide a tax relief on broadband subscription fee of up to RM500 for 2010-2012 should help drive takeup rate.
P1 has done admirably in winning market share in the fixed broadband segment, despite going up against Telekom Malaysia, which boasts a nationwide coverage. The company currently covers some 35% of our population and targets to hit 45% coverage by mid-2010. It also plans to roll out in East Malaysia later this year and has further acquired spectrum to deploy wireless broadband services in Singapore.
In January 2010, The Capital Group's Smallcap World Fund acquired 33.9 million shares in the company at RM1.15 per share. It subsequently acquired more shares from the open market, raising its stake to 41.3 million shares or a 6.3% stake as at Jan 21, 2010. The US-based fund management company is highly regarded for its astute long-term views.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
