China Mobile Looks Attractive on Cheap Valuation, Dividend

China Mobile Ltd. (CHL) may have been the worst performing blue chip stock in Hong Kong last year, but now may be an opportune time for investors to revisit the stock.

An attractive dividend yield, cheaper valuation compared to its competitors, China Unicom (Hong Kong) Ltd. (CHU) and China Telecom Corp. (CHA), as well as improving growth prospects with the launch of more advanced third-generation telecom services likely means a much better year for the telecom operator in 2010.

“Undeniably, China Mobile’s net profit growth has slowed down. But at current low valuation, we see values in the stock given its strong brand and huge subscriber base,” said Kevin Yim, an analyst at Guococapital.

Shares of China Mobile, the world’s biggest telecom operator by subscribers, have largely underperformed the broader market due to worries over rising competition after a government-mandated industry restructuring merged China’s six telecom operators into three nationwide full-service operators in late 2008. Due mainly on those concerns, its shares fell 6.4 percent in 2009, while the benchmark Hang Seng Index rose 52 percent. The company’s shares rose 0.5 percent Monday, to 74.85 Hong Kong dollars (US$9.65) each. But at current levels, China Mobile is trading around 10 times 2010 price-to-earnings multiple, much lower than China Unicom (Hong Kong)’s 30 times and China Telecom’s 15 times.

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