CIMB-GK did not give City Telecom (1137.HK) a rating; according to the discounted cash flow valuation method, the fair value of the stock should be HK$3.93 (weighted average cost of capital is 12.9%).

City Telecom's net profit for FY09 increased 70% to HK$213 million. CIMB-GK anticipates that the number of users of the company will continue to grow over the next three years. The market share will rise from 22% as of June 2009 to 35% in fiscal year 2012, at which time the number of broadband subscribers will reach 650,000. Currently, the ratio of the stock's corporate value to EBITDA is 3.45 times. Considering its stable income and unique market position, the stock price is undervalued.

City Telecom rose 6.20% to HK$2.74 throughout the day.