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China Mobile Offers Deep Value, Says DaiwaBy Adam Routh
China Mobile (941.HK) shares slipped on Monday despite posting solid third quarter earnings.
The Chinese telecom giant reported 4.6% year-on-year profit growth to CNY92.1 billion for the first nine months of the year, on 4.9% higher revenue of CNY569.5 billion.
Profit for the third quarter increased 6.9% compared to last year to CNY29.4 billion on the back of a 7.4% year-on-year increase in service revenues, driven by a stronger-than-expected performance in broadband.
Here's Daiwa analyst Ramakrishna Maruvada's take on the results:
The unmistakable conclusion for us is that China Mobile’s broadband business is gaining significant momentum fuelled by both market-share gains and average revenue per user (ARPU) increases.
Meanwhile, we believe the elimination of domestic long-distance charges from September may have weighed on the mobile business, though customer additions suggest 4G subscriber growth momentum is slowing for China Mobile, while China Unicom is gaining ground.
The results also suggest, perhaps not surprisingly so, that the launch of unlimited plans from May 2017 has stimulated data usage, with a slight acceleration in volumes (3Q17: +122% YoY; 2Q17: +113% YoY; 3Q16: +104% YoY).
Maruvada has a buy rating on the stock with a target price of HKD116.50 a share, implying 46% upside. He says the shares offer deep value with the stock trading at a 30% discount to its past-14-year average forward EV/EBITDA multiple.
Shares in China Mobile have vastly under performed this year, losing 3.9% so far compared to 28% gain by Hong Kong's benchmark Hang Seng Index.
Source: Barron's Asia
http://www.barrons.com/articles/china-m ... 1508739135
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