CHINA TOWER(00788.HK)：10：1 STOCK CONSOLIDATION IS EXPECTED TO APPEAL TO INSTITUTIONAL INVESTORS AND REDUCE TRANSACTION COSTS-格隆汇

机构：国泰君安国际
研究员：Noah Hudson

　　We maintain China Tower's (the "Company") "Buy" investment rating and HK$13.50 target price (equivalent to our HK$1.35 target price in our last Company Report, which was before the 10:1 share consolidation today; see below).
　　The Company has implemented a 10:1 share consolidation and the H shares board lot size has changed from 2,000 shares to 500 shares, effective at the start of the trading day today, 20 Feb. 2025. Every 10 previous existing shares is now consolidated into one share. The total number of shares issued by the Company has changed from 176,008,471,024 shares as of yesterday, to 17,600,847,102 shares as of the start of the trading day today, 20 Feb. 2025.
　　The share consolidation is expected to attract a broader range of institutional and professional investors and other members of the investing public, thereby improving liquidity of the consolidated and reduced H Shares. The share consolidation reduces the total number of existing shares and therefore brings about a corresponding upward adjustment in the trading price of the shares. Based on the 19 Feb. 2025 closing price of HK$1.210 per H share, the market value of each board lot of 2,000 shares was HK$2,420 on 19 Feb. As of the start of the trading day on 20 Feb., the estimated market value of each board lot of 500 shares is HK$6,050 (based on the theoretical closing price of HK$12.10 per share now that the 10:1 share consolidation and change in board lot size has become effective).
　　As most banks and securities houses will charge minimum transactions fees for each securities trade, it is believed that the share consolidation and change in board lot size reduces the overall transaction and handling costs of dealings in the shares as a proportion of the market value of each board lot. When deciding to invest in any particular company, it is assumed that institutional and professional investors tend to evaluate, among other factors, the stability of the share price performance and its comparison with peers in a particular sector, including the price per share and board lot value. Additionally, it is generally believed that a higher share price is more appealing to investors, as low share prices are often associated with business non-performance, higher volatility and higher investment risk by general investors. Therefore, the upward adjustment in the trading price of the consolidated shares is expected to make investing in the Company’s shares more attractive to a broader range of investors.
　　It is also expected that the share consolidation will enhance the corporate image of the Company and attract a broader range of institutional and professional investors as well as other members of the investing public. This includes institutional investors whose house rules might otherwise prohibit or restrict trading in securities that are priced below a prescribed floor, thereby improving liquidity of the Company’s shares.
　　Catalysts: Increasing demand for AI-driven computing and cloud expansion may drive further leasing demand from telecom and data center operators.
　　Risks: Government policy on telecom infrastructure pricing may affect leasing rates. Rollout of 5G may be slower-than-expected due to CAPEX constraints from telecom operators. U.S.-China tensions on semiconductor restrictions could impact AI-driven infrastructure growth.