How Telefonica's share unloading plans affect China Unicom

Will the 5% share unloading plans alter China Unicom's underperformance?

According to Maybank Kim Eng, currently, Telefonica holds 5% shares of China Unicom while the Parent and Public are holding 76% and 19% shares, respectively.

Maybank adds, therefore, the news about Telefonica may sell its remaining 5% shares of China Unicom upon the lock-up expiry in June should remove the share price overhang, in its view. 

Here's more:

Implication: China Unicom share price performance has been underperforming peers and the Hang Seng Index in this year, and we believe it should have factored in the 5% share unloading concern. 

Action: We recently upgraded China Unicom from HOLD to BUY after their upbeat FY12 result. Since management reiterated the low cost smartphone strategy and would reduce the CAPEX in FY13F and beyond, we estimate the strong earnings growth to remain with improving free cash flow outlook.

Current share price is now trading at 0.9x/0.8x PBR, 28x/16x PER, 1%/3% dividend yield of FY12 actual or our FY13F estimate, which looks attractive to us especially we estimate its FY13F EPS growth to be 76% (our estimate is about 13% above consensus). Recommend BUY on any share price weakness.