STOCKWATCH: PCCW/2 (potential for more job cuts: analyst)

Chan's resignation came a few months after PCCW's deputy CEO Norman Yuen's resignation. "How can one have confidence in a company when its top executives are leaving?" he said. He said his brokerage has raised concerns over PCCW's NOW operations for a while now. "They have already cut jobs in London and Hong Kong. They said previously that they are looking to commit 200 mln usd a year to develop NOW but I expect this will be cancelled, especially with what is happening to YAHOO!," he added. He said there is the potential for more job cuts and one has to start questioning the whole business plan and rationale. He said PCCW's hands were tied regarding Cable & Wireless' pending sale of a 7.5 pct stake in the company. "There are no buyers for the stake. They have been looking but have yet to find any buyers," he said. Cable & Wireless cannot place out the shares in the market as it would severely impact PCCW's share price, and affect the sale of its second batch of s hares which will be eligible for sale in August, he said. "This rules out a placement for the moment. Chances are they may wait for August when the whole stake is unlocked. Then they wouldn't care what happens if the share price falls with a placement." But the analyst believes that an exchangeable bond issue, where bonds issued are convertible into PCCW shares, is the most viable option for Cable & Wireless. "No one wants a stock exchange option. They may view a bond issue more favourably as it gives them a future option." He sees PCCW shares falling to as low as 3.00-3.50 hkd as the shares are still expensive compared to other telcos. Credit Suisse First Boston's Akanie Law said the losses in Hong Kong's telco stocks were driven by falls in NASDAQ but were overdone, and that she expects them to rebound in one to two weeks. Among the telco stocks, she said she still recommends China Mobile and China Unicom in Hong Kong and China and SingTel and Korea Telecom in Asia. "China Mobile's current price is very cheap given its revaluation of multiple earnings stood at 9.6 times, as compared to 11 to 12 times for the international peers such as Vodafone and Orange," Law added. She said the target price for China Mobile is estimated at 48.0 hkd. On China Unicom, Law said the company will have more upside potential with a target price of 22.0 hkd.

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