Gigantic companies are always in the news. Almost every day we hear something new about Apple, Exxon, IBM, Wal-Mart and Google, but nearly nothing gets said about China Mobile Ltd. (CHL/NYSE), itself a giant with a market capitalization of US$212.9-billion — about the same as that of Wal-Mart and Chevron. China Mobile provides cellphone services to 655.4 million customers, representing 70% of the Chinese market.
China Mobile was the biggest company to appear when we used the Google Finance stock screener to identify companies with dividend yields of more than 3.5%, a net profit margin of more than 20%, five-year growth in earnings per share of 10% or more, and a total debt/equity ratio of less than 5%.
Although we did not screen for dividend growth, the company’s board has increased its dividend by 19.9% over the past five years — a nice bonus. When the generous 3.7% dividend is included, China Mobile investors have enjoyed a total return of 24% over the past year.
The company’s American depositary receipts (ADRs) — which represent the underlying securities of a non-U.S. company that trades on a U.S. exchange — were available for less than US$50 between September and January, but they are up 11.1% this year and now trade for around US$53.75. The ADRs spiked above US$55 earlier this month; should they dip below US$50 again, they would likely represent a huge bargain.
Mostly state-owned, China Mobile is viewed as a slow-moving giant with a limited network and fewer handset choices than its smaller rivals. As a result, its ADRs trade at just 11 times earnings, well below those of China Telecom Corp. Ltd. (18 times) and China Unicom (27.3 times).
.In a March 24 article in Barron’s, columnist Kopin Tan said China Mobile’s ADRs trade at a vast discount to its rivals because its limited network, used only in China, does not work with many popular phones. Companies such as Qualcomm, however, are making chipsets that can run on a variety of phones and networks, which should help China Mobile in the future.
“Introducing new technology can be tricky. But it helps that China Mobile shares already reflect the grim outlook and well-aired challenges,” Mr. Tan wrote. “Strip out the US$46-billion of cash it holds, not to mention non-core assets like its 20% stake in the Shanghai Pudong Development Bank, and the wireless business looks like even more of a bargain.”
The catalyst most likely to propel China Mobile’s shares higher is Apple’s upcoming iPhone 5. Given that Apple CEO Tim Cook was in China this week to meet executives of Chinese telecom companies — and given that China Mobile is by far the biggest player in China — it makes sense that a deal between the two giant companies will soon be announced. When that happens, CHL will jump.
Although China Mobile’s profit margin slipped to 23.8% in 2011 from 24.7% in 2010, the company’s operating revenue rose 8.8% and its net profit rose 5.2% to ¥125.979-billion ($19.99-billion). Basic earnings per share rose to ¥6.27 (99.5¢) from ¥5.96 (94.5¢). The company paid out HK$3.327 (42.8¢) in dividends in 2011, up from HK$3.014 (38.8¢) in 2010.
China Mobile’s credit is rated Aa3 with a positive outlook by Moody’s and AA-/Outlook Stable by Standard & Poor’s, about the same as China’s sovereign credit rating.
On March 16, China Mobile chairman Wang Jianzhou said the company would set aside ¥20-billion ($3.17-billion), up from ¥17-billion ($2.69-billion) last year to offer free handsets to customers who sign up for some of its 3G services.
Source:cn-c114.net