The Zacks Analyst Blog Highlights: Citigroup, HDFC Bank, China Unicom, Research In Motion and Apple

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Mar 21, 2012, 09:30 ET

CHICAGO, March 21, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Citigroup Inc. (NYSE: C), HDFC Bank Limited (NYSE: HDB), China Unicom (NYSE: CHU), Research In Motion Limited (Nasdaq: RIMM) and Apple Inc. (Nasdaq: AAPL).

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Here are highlights from Tuesday's Analyst Blog:

Citi Offloads Shanghai Bank Stake

Citigroup Inc. (NYSE: C) has offloaded its 2.71% equity stake in Shanghai Pudong Development Bank ("SPDB") for an after-tax gain of around $349 million. The stake sale was made though block trade to institutional investors.

The two companies have, however, made strategic arrangement to cooperate with each other. Both the companies are discussing a number of mutual initiatives, including Citi's global network and credit lines utilization to aid SPDB in expanding internationally in future.

This sale follows Citi's recent offloading of its entire 9.85% stake in Housing Development Finance Corporation Ltd. (HDFC) in India for an after-tax gain of approximately $722 million. Notably, HDFC is a premier housing finance company of India and the promoter of HDFC Bank Limited (NYSE: HDB), one of the largest banks in India.

We think the stake sale is part of Citi's ongoing capital planning efforts. Banks need to boost up their capital levels to encounter any financial crisis and satisfy global banking rules.

Moreover, Citi has recently won approval for launching its own card business in the country. Citi's Chinese subsidiary Citibank (China) Co. Ltd. received approval from the China Banking Regulatory Commission to launch its own credit card business in that country. The company will launch both retail and commercial cards before the end of this year. This marks a landmark for Citi, the first U.S.-based bank to introduce its own credit card in China.

Furthermore, Citi's securities joint venture (JV) in China with Shanghai-based Orient Securities Co. received a regulatory nod in January this year. The JV named Citi Orient Securities Co. will carry on investment banking activities including securities underwriting and sponsoring.

Our Take

The beefing up of capital levels is an impressive effort on the part of Citi. The company is also emphasizing on growth in the international markets in the midst of a slowdown in the U.S. market. The company has an encouraging overseas presence and is making every effort to expand and tap opportunities in the emerging markets.

Citi's efforts to expand its business in China are part of its strategy to explore its thriving economy and booming consumer and commercial market. We believe that with such expansion efforts, Citi's global network will be enhanced and its revenue base will benefit by leveraging on faster-growing economies like China, thereby increasing its market share internationally.

China Unicom Adds 3M Users

China's second largest mobile operator China Unicom (NYSE: CHU) added 3.232 million subscribers in February, up 1.52% from the prior month. This takes the company's total customer base to 205.97 million.

The company's GSM subscriber base rose to 160.073 million with the net addition of 0.250 million customers, while its 3G subscriber base increased to 45.894 million with the net addition of 2.83 million in January. China Unicom added more 3G subscribers in February compared to 2.05 million last month.

The company's 3G business is performing well and the momentum is expected to continue well into the future. 3G remains a compelling opportunity and represents the single biggest driver of the company's long-term growth.

We believe China Unicom will continue to make significant progress in expanding economies of scale in 3G, broadband and other businesses that will likely improve its overall revenue and profitability. The company is offering 3G services in collaboration with Research In Motion Limited's (Nasdaq: RIMM) BlackBerry phones. Additionally, the company also benefited from being the exclusive distributor of Apple Inc.'s (Nasdaq: AAPL) iPhone in China.

China Unicom's 3G and fixed-line broadband businesses have been ramping up since last year. However, these businesses are expected to remain under pressure through this year due to increasing depreciation and amortization expenses; network, operation and support expenses; as well as selling expenses. We believe these expenses will have an adverse effect on the company's future profitability, free cash flow and margins.

Further, higher handset subsidies and increased costs related to 3G service deployments will continue to be headwinds for the company. Despite these challenges, we expect China Unicom to benefit from new users this year.

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