Tel.

+44 (0)20 7232 3090 Traded on

AIM, London
Fax +44 (0)20 7232 3099 Stock Exchange

www.iirgroup.com Regulated and

LSE: IIR authorised by

Chunghwa Telecom Ltd. 08 July 2008

Update Report – 1Q 08 Results

Other segments to drive top line, going forward

Common BUY Fundamental research indicates a 13% upside in the common stock over the next 6-24 months. We
Direct
have access
calculated to the
the target full
price report
based free of charge
on fundamental at a weighted average of target
factors, using
Stock http://www.iirgroup.com/researchoracle/viewreport/show/20232
prices obtained using DCF and comparative valuation methodologies.

Ticker: 2412.TW
Target price: NT$85.52
We upgrade the common stock from a HOLD to a BUY with a 6-24 month target price of NT$85.52 per
Current price: NT$76.00 share.

ADR HOLD The ADR1 is expected to depreciate by approximately 1% over the next 6-24 months as the 13%
fundamental upside is offset by 1 percentage point decrease in ADR discount while 15 percentage
point downside attributable to the anticipated depreciation of the Taiwanese dollar against the US
dollar and over the same period.
Ticker: CHT
Target price: US$24.21
We upgrade the ADR (1 ADR = 10 common shares) from a SELL to a HOLD with a 6-24 month target
Current price: US$24.49 price of US$24.21 per share.

Supervisor: Jinesh Joshi Investment horizon - short term actionable trading strategies
Analyst: Smita Uchil This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months.
Editor: Shem Pennant If this report is provided to you by your broker under the Global Settlement, you may now also access (free of
Global Research Director: charge) the short term trading outlook that we publish from time to time for this issuer, looking at the
Satish Betadpur, CFA coming 5-30 days for readers with a shorter trading horizon. These are available on-line only at
www.researchoracle.com.
Next news due:
2Q 08 results, August 2008
Report summary
In 1Q 08, Chunghwa Telecom Ltd. (Chunghwa) reported revenues of NT$50,957 mn, representing
12.1% y-o-y growth. The y-o-y growth in revenues was driven by an increase in revenues from all
segments. However, we have revised our revenue estimates downwards in order to reflect lower than
expected growth in revenues in 1Q 08. Going forward, we expect revenue growth to be driven by an
increase in revenues from other segments partially offset by a decline in revenues from the Wireless,
Fixed Line, and Internet & Data segments. Adjusted3 EBITDA4 margin is expected to decline as we
anticipate an increase in cost of services over next two years. During the last quarter, Chunghwa
announced a Joint Venture (JV) with Viettel Corporation (Viettel) to provide Internet & Data services in
Vietnam which will commence operations in 3Q 08. This JV is the first step taken by Chunghwa to
capture markets outside Taiwan by increasing geographical reach. Furthermore, in the press release
dated 27 June 2008, Chunghwa announced NT$19.1 bn capital reduction programme for FY 2008.
We believe, the capital reduction programme will increase shareholders value by increasing Return on
Equity (ROE). As a result we upgrade the common stock from to a BUY from a HOLD as we believe it is
trading below its fair value.

Currency impact for US investors2

The impact by itself of the anticipated currency movements on the ADR (now US$24.49), without
considering changes in the share price, is broadly negative and is expected to be:

Over 6 months: US$25.67

Over 12 months: US$22.56

Page 1 Refer to page 4 for all footnotes