CHL: China Mobile Limited Stock Analysis

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This is part 1 of Chinese Stocks to Watch in 2007 Series.

Here’s my first pick:

China Mobile Limited (CHL)

China Mobile Limited provides mobile telecommunications services in Mainland China. The company provides various voice-related services, including local calls, domestic long distance calls, international long distance calls, intraprovincial roaming, interprovincial roaming, and international roaming. It also offers value-added voice services, including caller identity display, caller restrictions, call waiting, call forwarding, call holding, voice mail, and conference calls. In addition, the company provides short message services, wireless application protocol, multimedia messaging services, Java applications services, instant messaging, wireless services, and location-based services. China Mobile provides virtual private mobile network services to its corporate customers. It offers its services through proprietary sales outlets and retail outlets. As of April 30, 2006, its total number of subscribers was approximately 265.0 million. China Mobile Limited has strategic alliances with Phoenix TV; and Along Mobile Technologies, Inc. The company was incorporated in 1997 under the name China Telecom (Hong Kong) Limited and changed its name to China Mobile (Hong Kong) Limited in 2000. Further, it changed its name to China Mobile Limited in May 2006. China Mobile is headquartered in Hong Kong. China Mobile (Hong Kong) Limited is a subsidiary of China Mobile Communications Corporation. (Source: Yahoo! Finance)

I recommended this stock back in October as a solid international technology play on the growing Chinese demand for telecommunications equipment.

The company holds $18 billion in cash, has kept debt to equity below 20%, and maintains over $8 billion in FCF.

My favorite CHL metric is the small institutional ownership, which stands at less than 2%. When institutional investors control the majority of a firm’s shares, it can be difficult to determine what motivates the company to perform well.

When the majority of company shares is owned by top board members and non-institutional investors, management loses money when the stock performs poorly. High management share ownership will motivate China Mobile Limited board members and staff to create shareholder value as they work at building a stronger and more profitable business.

Low institutional ownership is a big plus for CHL. I will continue to track this stock until a prime buying opportunity presents itself.

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