As you may aware, terrible things happened in Lasha (China) a few days ago. It is reported 5 young girls who worked for an apparel shop were killed in the riot (in this particular case, arson set by the thugs). I noticed the last text message one of the girl sent to her father is: Don’t worry about me, dad. 最后一条短信：”不要担心我”. I certainly wish things would turn out differently for the girls. But on the bright side, I think her family at least got some pieces of their girl’s last moment. This reminds me of a related event. On September 11, 2001, some people who buried under world trader center tried to call their family members, or text messaging, and some got saved that way. I’m sure you have heard similar stories about cell phone saving people’s lives too.
So what’s my point? We are increasingly living in a mobile world nowadays. From business point of view, the enablers of this technology can make a fair share of profit, while providing reliable service to the consumers (hopefully mostly for entertainment, not life or death situation).
Year 2007 result
China Mobile (CHL) released its year 2007 results on March 19 (PDF file here). Here are the highlights:
. Turnover (Revenue) reached RMB357.0 billion, up by 20.9%
. EBITDA of RMB194.0 billion, up by 21.6%
. Profit attributable to shareholders of RMB87.1 billion, up by 31.9%
. Total subscribers exceeded 360 million, up by 22.6%
By any common measures, the performance of past year is good. But the US ADR (CHL) tanked following the announcement. Why? I think some analysts are looking a this as “glass half empty” rather than “glass half full”. Quote the Bloomberg :
“The penetration rate in the urban areas is high and almost everyone has a mobile phone, so there are more growth prospects expanding into the rural areas,” said Teresa Chow, who helps manage $1.1 billion at RBC Investment Management Asia in Hong Kong, including China Mobile shares. “Income levels in rural areas are rising, so that is a big growth area.”
“The carrier’s gain in subscribers hasn’t been matched by an increase in customer spending as the company focused on rural areas, where the average annual disposable income last year was 4,140 yuan, a third of the 13,786 yuan for urban residents…”
I think another growth driver is the data service for unban users. But the real fear among analysts about China Mobile is the re-org and (upcoming) 3G deployment, which I will talk later on. For now, I am looking forward to getting the dividend, which they announced on the report, that’s will be 1.99 HKD per share. Since each US ADR is equivalent to 5 ordinary shares, I will get 10.00 HKD (about $1.50) for my CHL.
I am not keen to the dividend (the money itself). It’s the way they pay out the dividend, more than 40% of profits each year, gives me confidence on the company’s profitability. This is opposite to companies like China Ping’an, whch asked money from shareholder again and again. (Do you think Ping’an will deploy the money wiser than yourself 🙂
Also, China Mobile will not affected by the business cycle. They derive 80% of revenue from consumer spending (20% business). So I consider this is a very rare secular growth stock from China.