China Mobile: A Stock With Alot Of Upside

Introduction
China Mobile Limited (CHL) is an investment holding company and a mobile services provider in China. Its principal activity is providing mobile telecommunications and related services in 31 provinces, autonomous regions and directly administered municipalities in Mainland China and Hong Kong. As of December 31, 2007, the total number of subscribers reached 369.339 million. The Company’s businesses can be primarily divided into voice business and new businesses.

Recent Earnings Report
China Mobile Ltd., the country’s biggest mobile phone carrier, said Monday its first-quarter
profits surged while China Telecom Ltd., the country’s main fixed-line carrier, reported essentially flat earnings, reflecting a shift in consumer tastes.

China has the
world’s biggest population of mobile users, with some 520 million accounts, and the government says that number should reach 600 million soon.

China Mobile said profits for the three months ending March 31
rose 37.2 percent over the same period of 2007, to 24.1 billion yuan ($3.4 billion). It said the number of subscribers rose 6 percent to 392 million.

China Mobile said the rate at which it signs up new accounts accelerated by 33 percent to 7.6 million per month in the quarter, driven mostly by new business in rural China. With many of the more prosperous eastern Chinese cities saturated, rural areas are the new target.

Beijing is believed to be on the verge of approving licenses for third-generation, or 3G, mobile service to support mobile video, Web access and other services. That is expected to boost revenues further for mobile carriers as it opens up new opportunities. China Mobile launched trial service this month of a homegrown Chinese 3G standard, known as TD-SCDMA, in Beijing and seven other cities.

Recent Analyst Target
Analysts at Pali Research maintain their
“buy” rating on China Mobile Ltd. The target price has been reduced from $115 to $112. In a research note, the analysts mention that the company has posted its 1Q subscriber growth ahead of the recently raised estimates.

Although China Mobile’s subscriber growth and margins continue to be robust, the company’s ARPU for the quarter fell short of the estimates, the analysts say. The EBITDA estimates for 2008 and 2009 have been reduced from CNY239.2 billion to CNY234.1 billion and from CNY303.1 billion to CNY295.0 billion to reflect lower ARPU assumptions.

Technical Analysis
Current Price: 84.58
RSI = 60+
Fast Stochastics = 83+
MFI = 57+
Accumulation phase.

Technicals point to slightly overbought conditions. This might lead to pullback in the stock price, but after that CHL will continue its upward descent.

(Source: Forbes, Google Finance)

  • Good analysis!