QUMMIF-Equity-Report-BT Plc

QUMMIF INVESTMENT CLUB |2015-2016 QUMMIF. All rights reserved www.qummif.org
Share Price Performance
Performance Over 1M 3M 12M
Absolute (%) 4 31 21
Relative (%) 38 11 3.5
The price relative chart measures performance against
the which closed at £ 61.78 on 10 November 2015
-10
0
10
20
30
40
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Price Price Relative
Investment Fund
Equity Research Date: 10 November 2015
BT GROUP PLC (BT/A:LN)
Consolidate Momentum, Long term benefit
Event
This year, BT delivered on core business in globally challenging markets,
beating the outlook set at the beginning. Even though, the group’s revenue
trend was down 0,4%, but the BT Consumer revenue was up 7%. This was
offset by declines in our other lines of business, in part due to regulatory
pricing pressures. The normalized free cash flow of £ 2,830m was up 16%
and ahead of outlook for the year of above £ 2.6bn. Looking ahead, BT
need to improve the provision of Ethernet services and recover more
quickly when BT do fail to meet their premises.
Investment case
The additional debt levels that coming from acquisition of EE may increase
the debt risk, but it’s also expected to generate significant operating cost
and capex savings around £ 3bn after integration costs. Tactically we
would buy the stocks at current price soon after consolidation period to
expect a long term return over 12 months as catalysts emerge.
Catalyst
We believe the company will grow stronger in the near future that reflected
on stock prices for uptrend cycle because of a strong discipline has helped
them fund investments in their five strategic growth areas. BT announced
the proposed acquisition of EE for £ 12.5bn, secured exclusive rights to FA
Premier League Football matches for a further 3 years and extended
AVIVA Rugby rights. Their proposed full year dividend to shareholders is
12.4p, up 14%.
Earning Release Date 2015/2016
Q1 30 June 2015 Q3 31 Dec 2015
Q2 30 Sept 2015 Q4 31 March 2016
Rating BUY *
Price (10 Nov 15, £) 4.65
Target price (£) 5.50¹
Target price (%) 18.28
Stop Target price (£) 5.00
Stop Target (%) 7.41
Portfolio Cap Allocation (£) 4,000
Market cap. (£ m) 38,990
¹Target price is for 12 months.
*Outperform
PE Ratio (11 Nov 15): 17.16
Dividend: 8.5p (Final)
; 4.4p (Interim)
Div. Frequency: Semi Annual
EPS: 31.50p
Research Analysts
Tjie Ferry Sapta Nugroho
44 74 7967 0132
ferry.sapta.nugroho@gmail.com
Meilin Gao
44 74 6478 2292
maggie-g.gao@hotmail.com
Tsan(Can) Gao
44 77 5152 5953
tsan.gao@outlook.com

2
Recommendation
Strong points
• BT is the market leader of telecommunication industry in UK Market which supported with ongoing
acquisition of EE in August 2016, which brings a more cutting-edge competitiveness in a global market.
• BT brand is now worth US$ 16.2 billion which a 6% improvement on a year earlier as the 8th
most valuable
telecoms brand in the world.
• BT has a robust risk management team to control and mitigate the local and global risk in current situation.
• BT has run large and complex cost transformation programs by reducing operating costs and capital
expenditures around £ 5.5 billion.
• BT’s stock price is currently in uptrend and signaling a bullish cycle after period of consolidation.
Weak points
§ BT are going to experience an increased cost of debt coming from acquisition of EE by using debt bridge
facility of £ 3.6 billion; unfavorable economic conditions could impact the cost and debt terms.
§ BT has to deal with the exposed distinct risks coming from EE, for instance network and license investment,
spectrum pricing and regulation, technological change, market acceptance, and network development.
§ BT may be exposed with the probability of sideways or biased downwards trend relative to the true stock
value in the short-term period due to the large investment programs (e.g. mobility and future voice, fibre, and
TV Content).
Industry Overview
§ Telecoms is the central to the social and economic prosperity of countries across the globe. The business operates
in fiercely competitive markets, with today’s major players working hard to cut costs and drive growth.
§ The rise of digital creates huge opportunities for the sector, but poses significant threats too. The industry must be
able to respond by creating value-added for their customers and exploring new digital experiences.
§ The UK’s telecom market is shaped by strong mobile and broadband sectors, and by an innovative broadcast sector
which has pioneered business models for distributing digital content.
§ The global demand will continue to grow as there is an increasing demand from telecommunication services (e.g.
fixed lines, mobile and broadband, IT Services), and especially in digital products and services.
§ For telecom companies, the agenda is challenging. They have to adopt an aggressive digitization strategy for a
smooth transition to the selected digital demands in adjacent businesses and broader digital ecosystems.

3
Company Overview
§ BT Group plc is one of the world’s leading communications services companies, serving the needs of customers in
the UK and in more than 170 countries globally.
§ In UK, BT is also a leading communications services provider, selling products and services to consumers, small
and medium sized enterprises. The products ranges from local and long-distance telephone call, international calls
to and from the UK, broadband network solutions, web hosting to corporate customers, network ADSL, ISDN,
broadband internet access and etc.
§ BT has five major customer-facing lines of business, including:
- BT Global Services: provide networked IT service to more than 6,500 large corporations and public sectors
- BT Business: provide fixed voice, networking and broadband services to around 900,000 UK SMEs
- BT Consumer: largest consumer fixed-voice and broadband provider in the UK
- BT Wholesale: EU’s largest wholesale telecoms provider and serves more than 1,400 communication provider
customers in Great Britain,
- Openreach: BT focuses on the Fibre broadband network coverage and now UK has the highest coverage of
next generation access (NGA) broadband of the five largest countries in Western Europe.
§ Regulations in UK (Ofcom) set the conditions such prices in telecommunication industry) in international markets
plays a vital role in BT’s business activities.
§ In the past few years, the rise of digital creates a large number of opportunities for the telecoms sector in UK with
nearly 17% consumers are willing to pay up to an additional £10 a month for faster more reliable broadband.
However, internet and mobile users has low faith to the current service providers in telecom industry, which created
the barrier for the telecom industry to move forward.
§ With the strong growth in cash flow and profits, BT has reached an agreement to buy EE, the leading mobile
operator in UK to combine the best fixed network with the best mobile network.
§ In order to broaden and deepen the relationship with customers, BT has set up three strategies. The first is to deliver
superior customer service by improving speed of delivery and better operating performance. The second is to
“transform its cost” by adopting different training programs. The third is to “invest for growth” by investing in five
strategic areas believed to deliver sustainable profitable revenue growth – which will deliver value for BT’s
shareholders.

4
Operational Data
Income Statement (GBP£ m) 3/14A 3/15A 3/16E
Revenue 18,287 17,979 17,846
EBITDA 5,838 6,017 6,317
Operating Expenses 15,144 14,500 14,034
(Research & Dev costs) (739) (662) (600)
Operating Income 3,143 3,479 3,811
Pretax Income 2,312 2,645 3,149
Income Tax Expense 294 510 723
Income before XO items 2,018 2,135 2,426
Diluted EPS before XO items 0.245 0.26 0.2956
Net income adjusted 2,214 2,600 2,572
EPS adjusted 0.282 0.315 0.309
Dividends per share 0.109 0.124 0.14
payout ratio% 43.60 48.15 45
total shares outstanding 7,919 8,372 8,574
diluted shares outstanding 8,231 8,191 8,210
Cash Flow (GBP£ m) 3/14 3/15 3/16E
Net Income 2,018 2,135 2,377
depreciation & amortization 2,695 2,538 3,269
other non-cash adjustment 111 457 284
changes in non-cash capital (636) (914) (775)
Cash from operating activities 4,188 4,216 5,155
disposal of fixed assets 10 100 308
capital expenditures (2,356) (2,418) (2,454)
increase in investments - - -
decrease in investments 4 8 10
other investing activities (1,264) (1,764) -
Cash from investing activities (3,606) (4,074) (2,135)
dividends paid (778) (924) (1,049)
decrease in long term borrowings - (692) (692)
increase in capital stocks 75 1,201 1,000
decrease in capital stocks (302) (320) (320)
other financing activities (248) 316 210
Cash from financing activities (817) (419) (851)
Net changes in cash (235) (277) 2,169
Free cash flow 1,832 1,798 1,920
Free cash flow to firm 2,333 2,225 1,926
Free cash flow to equity 2,278 1,206 1,317
Free cash flow per share 0.23 0.22 0.22
Balance Sheet (GBP£ m) 3/14 3/15 3/16E
total current assets 5,706 7,471 9,247
cash & near cash items 695 434 530
short term investments 1,774 3,523 5,184
accounts & notes receivable 1,370 1,454 1,387
inventories 82 94 88.68
other current assets 1,785 1,966 2,056
total long-term assets 19,192 19,720 19,780
long term investments 34 44 41.96
gross fixed assets 48,901 48,708 49,130
accumulated depreciation 35,061 35,203 35,934
net fixed assets 13,840 13,505 13,196
other long term assets 5,318 6,171 6,542
total current liabilities 7,687 7,708 7,643
accounts payable 2,745 2,835 2,743
short term borrowings 1,873 1,900 2,000
other short term liabilities 3,069 2,973 2,900
total long term liabilities 17,803 18,675 18,813
long term borrowings 7,941 7,868 7,573
other long term borrowings 9,862 10,807 11,240
total liabilities 25,490 26,383 27,924
share capital & apic 470 1,470 1,720
retained earnings & other equity (1,062) (662) (253)
total shareholders’ equity (592) 808 1,103
total liabilities & equity 24,898 27,191 29,027
Ratio Analysis 3/14 3/15 3/16E
P/E ratio 14.77 16.53 15.4x
P/S ratio 1.63 1.96 2.2x
P/B ratio - 45.38 15.7x
current ratio 0.74 0.97 -
quick ratio 0.50 0.70 -
interest coverage ratio 5.46 6.55 -
Margins (%)
EV/EBIT 11.90 12.21 -
EV/EBITDA 6.41 7.06 7.3x
gross margin 0.00 0.00 0.0x
EBITDA margin 0.32 0.33 0.4x
operating margin 0.17 0.19 0.2x
profit margin 0.11 0.12 0.1x
ROA 0.08 0.08 0.1x
ROE 0.00 0.00 1.5x
tot debt/capital 1.06 0.92 -
tot debt/equity 0.00 12.09 -
asset turnover 0.74 0.69 -
accounts receivable turnover 12.77 12.73 -
Source: Bloomberg, BT Group Annual Report
2015

5
Financial Analysis
I. Company Comparison
*Negative P/E Ratio due to negative growth on Vodafone EPS.
As overall, BT valuation is the most progressive and undervalued of company’s stocks at the moment. With the highest
enterprise value and positive growth of EPS and ROE, The Company’s stock price is still the most competitive low
amongst the other companies. It indicates a good signal to buy the stocks to secure a long-term capital gain.
II. Company Insight
Since 2011, the revenue of BT Group kept on decreasing
roughly. In year 2013, BT Retail was divided to two
departments, BT Business and BT consumer that helped in
increasing to £18,287 million. Revenue decreased 7%
including a £206m negative impact from foreign exchange
movements and a £9m decline in transit revenue. The key
revenue measure, underlying revenue excluding transit that
decreased 4%, primarily reflecting lower UK public sector
revenue.
EBITDA increased 1% and was up 3% excluding exchange
movements. Depreciation and amortization decreased 16%
as a result of lower depreciation on some UK public sector
contracts and the impact of some assets becoming fully
depreciated. EBITDA kept growing even the revenue
decreases.
Options over 13m shares (13/14: 24m shares, 12/13: 24m
shares) were excluded from the calculation of the total
diluted number of shares as the impact of these is
antidilutive. The net income keeps increasing after
2011which means profit attributable to shareholders. In this
year, net income increased roughly 5.8% that contributed to
the EPS for 14%. In 2015, the sale of redundant copper
generated net income of £29m and this indicates no benefit
from this in 2015-16.
Company Ticker
Current
Share Price
Enterprise
Value
EV/EBITDA
2015
EPS - 1 Yr
(%)
P/E ROE
Dividend
12M Yld
BT Group PLC BT/A:LN 4.75 46,345.04 7.59 3.11 17.15 2.64 2.38
VODAFONE GROUP PLC LON:VOD 2.21 90,899.37 7.89 -48.86 N/A* -2.04 4.59
TALKTALK TELECOM GROUP LON:TALK 2.38 2,921.23 17.08 151.61 43.47 17.86 5.52
20076
18897
18103 18287
17979
16000
17000
18000
19000
20000
21000
3/11 3/12 3/13 3/14 3/15
Revenue
5540
5898
5786
5838
6017
5200
5400
5600
5800
6000
6200
3/11 3/12 3/13 3/14 3/15
EBITDA
1502.00
2003.00 1948.00 2018.00 2135.00
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3/11 3/12 3/13 3/14 3/15
Net Income

6
BT made a strong progress in 2015 in both business and
financial sectors. The EPS increased 14% to 32p. This was
delivered after the large all-employee share option plan
maturity in summer in 2015, and the equity placing to
partly finance the acquisition of EE. Both cases helped in
increasing the number of shares issued.
The Company’s stock price is steadily increasing around 27%
from the past 5 years with a growing profitability. The P/E
range indicates a worth-to-buy stock with moderate ratio
and not going overvalued yet. Within the bullish trend, it
indicates a good signal to buy the stocks to secure a long-
term capital gain.
Starting from 2013, BT Group granted quantity of long-
term borrowings by issuing bonds maturing in 2014 to
2037, in which the graph shows a minus ROE in 2013 and
2014. This does not mean that the company has a minus
income; in contrast, BT Group has a stronger ability in
issuing bonds and raise money for business activities. In
this way, negative ROE can also give a positive relevance
with the company’s growth.
As illustrated in the graph, year on year BT Group had a
steady ROA since year 2012 until now, which is around 8%.
The reason is that BT’s net income has grown around 19%
which closely relative to total assets increased by 14% for
this past 4 years. It indicates that the returns gained from
operational and investment activities are proportionately
allocated to the total assets.
9.57 8.78
11.58
14.77
16.53
0.00
5.00
10.00
15.00
20.00
3/11 3/12 3/13 3/14 3/15
P/E Ratio
0.21
0.24
0.27 0.28
0.32
0.00
0.10
0.20
0.30
0.40
3/11 3/12 3/13 3/14 3/15
EPS
0.77
1.24
(7.44)
(3.41)
2.64
(8.00)
(6.00)
(4.00)
(2.00)
0.00
2.00
4.00
3/11 3/12 3/13 3/14 3/15
Return on Equity
0.058
0.084
0.080 0.081 0.082
0.000
0.020
0.040
0.060
0.080
0.100
3/11 3/12 3/13 3/14 3/15
Return on Assets

7
The dividend of BT Group is paid semi-annually. Lately,
a final dividend in respect of the year ended 31 March
2015 of 8.5p per share was paid to shareholders on 7 Sep
2015, taking the full year proposed dividend in respect of
2014/2015 to 12.4p which amount to approximately
£1028m (13/14: 880m, 12/13: £749m). This dividend is
increasing by 14% compared with 2014. Since 2011, the
DPS increased at 13.75% in average each year. Generally,
the record date for final dividend is around 14 August and
28 December for interim dividends in each fiscal year.
Geographic Segments in GBP (2015) Sales (M)
UK 13,827
Europe, excluding the UK 2,328
Americas 1,115
Asia Pacific 581
Adjustment 128
Business Segments in GBP (2015) Sales (M)
BT Global Services 6,779
Openreach 5,011
BT Consumer 4,285
BT Business 3,145
BT Wholesale 2,157
Adjustments 128
Other 74
2.4 2.6 3 3.4 3.9
5 5.7 6.5 7.5 8.5
0
5
10
15
10/11 11/12 12/13 13/14 14/15
Dividend per share
Interim Final
UK
77%
Europe
13%
Americas
6%
Asia
Pacific…
GEOGRAPHIC SEGMENTATION
SALES 2015
Geographically, BT Group mainly focuses on
businesses in Europe especially in the United Kingdom.
For BT, only BT Global covers a minor business in the
US and in Asia Pacific.

8
From 1st
April 2014, BT Conferencing and BT
Security have moved into BT Global Services
from BT business. BT Global Services is the
largest line of business by revenue, generating
38% of the groups’ external revenue. And BT
Consumer is the next largest contributing 24%.
Around 60% of Openreach’s revenue is
generated from other BT lines of business so its
contribution to external group revenue is the
smallest; at 11% Total Openreach revenue is
equivalent to 28% of group revenue. It is the
group’s largest EBITDA contributor, generating
41% of the total, reflecting the return it earns on
its extensive network assets. But as a capital-
intensive business, Openreach incurs costs
relating to depreciation, which are not reflected
in this EBITDA contribution. BT Global
Services’ EBITDA margin is below those of the
other lines of business. At 17%, its proportion of
group EBITDA is therefore below its overall
revenue contribution.

9
Risk Assessment
Type of Risks Description Impacts on BT & Consequences Company strategies
Security &
Resilience
Interruptions on BT's IT systems, networks &
associated infrastructure:
Operation Risk: Cyber security incident, logical
attack, theft of copper cable & equipment, and etc.;
Reputation Risk: fail to protection data of
customers (business & customer); BT's own data,
information and intellectual property.
Operation Risk: financial loss & termination of
contracts resulted in loss of revenue, contractual
penalties and increasing unplanned costs of
restoration and improvement.
Reputation Risk: reduce future revenues &
undermine market power.
-Adopted robust control framework that focuses on
prevention, supported by tried-and-tested recovery
capabilities
-Cross-site recovery strategy (avoiding the need for
investing in new sites)
-Strengthened BT's network defenses & invested in new
tolls, techniques and skills to monitor threats
Major contracts
Revenues generated from complex and high-value
national and multinational customer contracts:
- Fail to manage & meet its commitments under
contracts, as well as changes in customers'
requirements
- Fail to implement new systems, new technologies
- Earnings may be reduced or contracts may
become loss-making through loss of revenue,
changes to customers' business, business failure
or contract termination
- Reduction of future earnings, profitability and
cash generation;
- Conducted trainings to BT people to identify and manage
risk properly
- BT-wide risk governance & reporting & local governance
& risk management process provide the visibility of key
risk & mitigation activities
Pensions
Engaged in a significant funding obligation in
relation to BT Pension Scheme (BTPS)
- Future low investment returns, lower interest
rates, high inflation, longer life expectancy &
regulatory changes may result in an increase in
the cost of funding of BTPS
- Adverse impact on BT's share price & credit
rating
- may increase in BT's cost of borrowing and limit
BT's future funding ability, thereby affecting BT's
ability to invest, pay dividends or repay debt as
it matures
- The BTPS has a well-diversified strategy, which reduces
the impact of adverse movements in the value of
individual asset classes
- BT's financial strength and strong cash generation
provide a protection against future variations in the
funding position
Growth in a
competitive
market
Operates in a dynamic and fierce competitive
industry under a stringent regulation control such
as regulatory intervention to promote competition
and reduce wholesale prices.
Fail to achieve sustainable, profitable revenue
growth could erode BT's competitive position and
reduce BT's profitability, cash flow and ability to
invest for the future
- Mitigate risks by delivering superior customer service
- Mitigate risks by seeking changes in regulation to level
the playing field hence compete effectively in adjacent
markets.
Communication
industry
regulation
In UK: operate under the regulation set by Ofcom
(Office of Communication);
Outside UK: under general licensing requirements
- Fail to in compliance with regulatory
requirements and constraints can bring negative
effects on BT's ability to compete effectively and
earn revenues.
- In Year 2013/14, BT might be exposed with loss
of revenue around £5.2bn with as regulation
enforced a lower market price
- Activities limited outside the UK can reduce
revenues
Formed a team of regulatory specialists (economists &
accountants, legal experts & external advisers) to
monitor and review the scope for changes in the
regulatory rule set and potential disputes with other CPs.
Business
intergrity and
ethics
Fail to comply with a range of local and
international Anti-corruption & Bribery Laws (UK:
Bribery Act; US: US Foreign and Corrupt Practices
Act)
Result in penalties, criminal prosecution lead to
a serious reputational risks with both investors
and consumers, which will result in a lower
future revenue and cash flow generated
- Implemented business practice 'The Way We Work' to BT
employees
- Conducted training program for BT employees
- Hired third party to perform Director of Ethics and
Compliance for review and investigation
- Implemented strict policy to adhere to applicable
sanctions and export control laws
Supply Chain
Suppliers of BT failed to in compliance with BT's
trading and ethical policies
Size of the impact from a supplier failure can
vary; Contractual breach, loss of revenue, suffers
penalties & reputation risk
- Conducted dual sourcing to reduce risk
- Operated in-life risk management process "Supply
watch" to minimize distraction to its customers
Consumer data
Processing
Fail to protect customer data & its own data - Regulatory enforcement action, fines, class
actions and etc.
- Reputational damage & financial loss
- extra costs resulting from termination of
customer contracts
Staff Privacy & Data Governance team to monitor the
risks and staff day-to-day activities to mitigate this risk
EE Acquistion
- Poor performance for EE before acquisition
- Uncertainties of approval of EE acquisition
- Increased cost of debt for enlarged company
- Reduce EE's value and hence resulted in a drop
in BT's net asset value
- Additional costs may incur and hence reduce
anticipated benefits
- Decrease the ability for enlarged company in
refinancing or repaying its debt
- Risks associated with EE are similar in nature to those
impacting BT today
- Provided reasonable assurance that significant risks
are identified and addressed by operating Risk
Management Framework

10
Overall Risk Assessment
Based on past year’s experiences, BT has built up a comprehensive risk management team on the purpose of monitoring
and mitigating different varieties of risks. These risks can be classified as two categories, which are principle risks &
financial risks.
Principle risks (as stated in above matrix) have the potential to impact BT's business, brand, people, assets, revenues,
profits and etc. Among these risks, regulatory risks are considered as a vital role in estimating BT's financial earnings
and profits since BT operates in a market where telecoms industry is highly related to government's regulations. In
year 5, in overall, regulatory price reductions lowered BT’s revenue and EBITDA by £150m to £200m in the year.
However, as next year Ofcom's strategic purposes remain broadly unchanged, like year 2014, regulations in UK would
have little impact on the company's financial performance. Furthermore, after a close examination of BT's main
business activities (customer based) and its implemented risk strategies as well as its FY14&15 financial reports, we
believe risks such as reputation and operational risk could be well managed and minimized under the supervision of
BT's well developed risk management team and hence we think these risks would have little impact on BT's next year
performance.
Apart from principle risks, BT's activities are also exposed to a variety of financial risks, including interest rate risk,
credit risk and liquidity risk. BT's interest rate risk arises primarily from BT's LT borrowings in the form of corporate
bonds which most of them will mature in next five years or longer. In order to hedge the interest rate risk, BT has
entered into cross-currency and interest rate swap agreements with commercial banks and other institutions to vary the
amounts and periods for which interest rates on borrowings are fixed. BT's bond rating as of 10 November, 2015 is
Baa2 in Moody's, which is quite stable and hence is very unlikely to increase the interest risk and credit risk. In addition,
due to the large amount of cash generated from investing activities, BT is capable to manage the payments for loans
and debts. Hence we consider BT as a lower credit risk stock compare to the last two years. In the meantime, BT holds
cash, cash equivalents and current investments in order to manage the long-term liquidity requirements. At the end of
the financial year, BT had undrawn committed borrowing facilities of £1.5bn maturing in September 2019 and a further
£3.6bn with an availability period to the earlier of the close of the proposed EE acquisition on August 2016, which is
subject to certain restrictions and can only be used to fund the transaction, including transaction costs. As a result,
risks on BT's stock does not overweight out stock valuation for next year.

11
Technical Analysis
In order to provide an extended view of chart analysis, we will see from different time series of 5 Year, 1 Year, 1 Month,
and 1 Week period as follows:
Market Cap (GBP m) 52 Weeks Range YTD Return Sub – Industry
38,990 365.1 – 481.75 15.95% Telecom Carriers
5 Year BT Stock Price Chart Analysis
Likely further recovery after bullish break
Key Resistance is about to intact. BT Group is mostly being in sideways pattern this year and by the end of
October 2015, we can see the 100 day moving average has crossed the 200 day moving average which has caused
the share price to increase. It strongly indicates a golden cross as good uptrend signal ahead. Based on the
analysis, the stock price is projected to intact a strong resistance line at £ 4.8 to break out later.
Indicator is bullish. The MACD has just initiated a sharp bullish crossover. This suggests that the upside
momentum is building up. It’s supported by a good market volume to maintain the price stability.
Next Resistance at £ 5. The price could potentially head higher towards the next key obstacle at $ 5 as all-time-
high price level and creates a new record. By considering a market trend and good fundamental basis, we can
expect the price goes higher to the another new price level at £ 5.25 and £ 5.5 as target price to accumulate return
around 16% within the next couple months.
Immediate Support at £ 4.17. Meanwhile, we advocate a stop-loss exit around/below £ 4, which is slightly
below the immediate support line. However, if the projection is more than 12 months, the stop-loss exit can be
extended up to the second support line with stronger trend at £ 3.5 and likely to bounce back to break the newly
support-turned-resistance of £ 4.17.

12
1 Year BT Stock Price Chart Analysis
Likely further recovery after sideways trend
Key Resistance is about to intact. After creating W pattern in between Dec 2014 and Jan 2015 which resulted
in increment, BT Group is entering the period of consolidation this year with another rebound cycle following a
positive trend correction. As we can see the 100 day moving average has crossed the 200 day moving average
which has caused the share price to increase. Based on the analysis, the stock price is projected to intact a strong
resistance line at £ 4.8 to break out later.
Indicator is bullish. The MACD has just initiated a sharp bullish crossover. This suggests that the upside
momentum is building up. It’s supported by a good market volume to maintain the price stability.
Next Resistance at £ 5. By looking the market trend and good fundamental basis, we can expect a new price
equilibrium level at £ 5 with marginal return of 4%. We should consider the all factors for either holding or selling
the stocks afterwards. If the market is good and as an investor, we still commit for a longer period of time, then
we can hold and wait to hit the next price level. Otherwise, we advocate to sell it in order to protect the profit
made.
Strong Support at £ 4.4. Meanwhile, we advocate a stop-loss exit around/below £ 4.4 as a strong basis during
sideways trend. Then, we can wait and see the market downtrend up to the lowest point or hit the other strong
support line (as mentioned in 5 Year analysis). Afterwards, we can buy on weakness to earn profit later

13
1 Month BT Stock Price Chart Analysis
1 Week BT Stock Price Chart Analysis
Likely further recovery after period of consolidation
First resistance is about to intact. From mid to end of October, we can see the stock price spikes rapidly and
sustained at resistance level of £ 4.76 before declining. Then, the trend starts to accumulate and about to intact
the closest resistance level at £ 4.7 from current price. As a weak signal, we can buy the stocks at £ 4.7. However,
in order to minimize the risk of loss, we advocate to buy the stocks at a stronger resistance level above £ 4.76 or
near to £ 4.8.
Indicator is bullish. The MACD has just initiated a smooth bullish crossover and being supported by 50 day
Moving Average crossed 100 day Moving Average. This suggests that the upside momentum is building up. It’s
supported by a good market volume to maintain the price stability.
Next Resistance as inline with 5 Year and 1 Year Analysis.
Strong Support at £ 4.6. Meanwhile, we can say a stop-loss exit around/below £ 4.6 as a first basis during
sideways trend. However, this support price level is not well represented because too much noises for a shorter
period of time. As inline with our long time of investment period, we highly suggest to exit at the other strong
support line (as mentioned in 5 Year and 1 Year analysis). Afterwards, we can buy on weakness to earn profit
later.

14
Relative Strength Index (RSI)
The RSI shows the BT commercial side between overbought or oversold by the market. Based on the RSI Chart, we
can see an overbought signal by end of October and back to neutral below 70 points which indicates as good basis of
buy signal with next target index at/below 60 points. This index also clearly defines the uptrend for BT Stocks.
BT’s Comparison on Return amongst Competitors
Security Currency Price Change Total Return Difference Annual Equiv.
BT Group PLC GBp 173.53% 224.55% 163.91% 27.05%
VOD LN Equity GBp 6.98% 60.64% - 10.12%
SKY LN Equity GBp 52.12% 79.57% 18.94% 12.64%
Within a 5 year period, the BT Return increases the highest compared with the other global and UK competitors (i.e.
Vodafone and Sky PLC). The trend line is inclining and the others is moderately moving upwards with some sideways
pattern. As overall, BT as the market leader with higher return and favorable market condition within telecom industry.

15
Experts View
Based on analyst’s recommendations from Bloomberg terminal across large investment banks, a positive
indication to buy this stock which is shown as follows:
The current average rating of all analysts who updated within last 12 months is relatively around 4 that indicates
a buy signal for BT Stocks at this moment. Moreover, if it’s combined with holds signal position from the
investors that bought the stocks couple weeks ago and wait for the sell signal position, we can acquire a bigger
rating above 4 that indicates a strong buy signal right now. Therefore, the next phase is waiting the all-time high
price created at the market as the sell signal price.
In addition, this table below consists of analyst’s recommendations with portfolio absolute return ranking:
Four out of six top rank analysts indicates buy and neutral signal, with more than 75% of all analysts stand at
the same position as the top ranks did. It strongly indicates a favorable position to buy the stocks.
As a stock analysis sample, we will see it from the 1st
rank analyst as follows:
The target price is GBp 520 reflected along the yellow line and the actual current price is GBp 461.25.

16
For details, this graph clearly points out of all analyst’s opinions over the target price spread during 5 year period:
During uptrend, it shows that current stock price falls between red and yellow area which indicates a perfect
time to buy the stocks, because the market is still giving a bullish signal and expected to be sold at higher price
of GBp 505 around red area. On the other hand, it would be a different scenario if the market is in bearish
condition with downtrend, then it’s better to buy stocks within green area.
Conclusion
We consider BT Group PLC as a profitable investment opportunity for Queen Mary Investment Fund as it appears to
be one of the most progressive companies in the telecommunication as the market leader for UK market. In a strategic
horizon, BT will heavily invest in future trend for digital products and services, while keep maintaining the current
core business in fixed lines, mobile and broadband, and IT Services. With the strong growth in cash flow and profits,
BT has reached an agreement to buy EE, the leading mobile operator in UK to combine the best fixed network with
the best mobile network; and also expected to generate significant operating cost and capex savings around £ 3bn after
integration costs.
In order to broaden and deepen the relationship with customers, BT has set up three strategies. The first is to deliver
superior customer service by improving speed of delivery and better operating performance. The second is to
“transform its cost” by adopting different training programs. The third is to “invest for growth” by investing in five
strategic areas believed to deliver sustainable profitable revenue growth – which will deliver value for BT’s
shareholders.
Based on financial performance, BT is growing rapidly in EBITDA around 30% each year with a strong performance
going forward. Net income is coming steadily with CAGR around 7% for this past 5 years. BT’s return on equity is
growing around 8% next year. Expected full year dividend will increase around 14% in 2016. The Company’s stock
price is steadily increasing around 27% from the past 5 years with a growing profitability. The P/E range indicates a
worth-to-buy stock with moderate ratio and not going overvalued yet. BT’s stock price is currently in uptrend and
signaling a bullish cycle after period of consolidation, it indicates a good signal to buy the stocks to secure a long-term
capital gain. As overall, BT has an incredible growth potential which can be realized in the next couple of months
makes it a real valuable asset for our portfolio.

17
Global Disclaimer:
The information and opinions in this report were prepared by Queen Mary, University of London
Postgraduate Investment Club (QUMMIF). QUMMIF makes no representation as to the accuracy or
completeness of such information.
All opinions expressed herein are subject to change without notice. The document is for information
purpose only.
Descriptions of any futures, options or other derivative products mentioned herein are not intended
to be complete and this document is not, and should not be construed expressly or impliedly as, an
offer to buy or sell products.
QUMMIF does not accept any liability whatsoever for any direct or consequential loss arising from
any use of the materials contained in this document.

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