China Mobile Ltd. (ADR) (CHL)

JMB21 (63.56) Submitted: 5/07/08 3:57 AM : Start Price: $85.87 CHL Score: -1.72

Fundamentals: I agree with others who have reminded us that the "8 gillion Chinese people are gonna need a cell phone" theory is beyond played out. That theme is already more than priced into this stock, and it's also already more than figured into CHL's real-world business activities. The fact remains, though, that CHL has managed to increase ROIC, sales, and earnings incredibly quickly over the last 5-10 years, while at the same time increasing shareholder equity and paying a dividend. Cash flow is solid. CHL has a good internal market, but it takes more than that to make a Chinese company a good fundamental story. CHL has much more than that, and has operated effectively in its market.
Technical: I owned CHL for much of 2007, which I was very happy about. It rolled over from a technical standpoint in late 2007-early 2008. It has recovered from that rollover and formed a cup with handle base and is in an appropriate buying range.
Valuation: CHL's current price figures about an 18% EPS growth rate and a future p/e of 21. I think both of those figures are reasonable (but not conservative).
I'm getting back into CHL based on good technical indicators coupled with good (though not underappreciated) fundamentals and a fair (but not bargain) valuation. The risk, of course, is that there is not a tremendous margin of safety based on my valuation of this stock. Tight stop.

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