China Mobile (CHL): If they miss, Godzilla's coming to Chinatown

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China Mobile Ltd. (ADR)  (Public, NYSE:CHL) now trades just under $100 a share. In the last six monts the stock has ran up 99% and in the last year it's leaped 157%.  This company and PetroChina (NYSE:PTR) have come under fire lately after Warren Buffet cashed out a few shares last week.  So what everyone wants to know is -- are these companies over valued?

PetroChina's shares have risen more than sevenfold since 2003. They continued to rise even after legendary investor Warren Buffet's Berkshire Hathaway Inc. began cutting its stake in PetroChina. Its value has risen more than 50% this year alone.  But I'm not really interested in PetroChina as much as China Mobile.

The recently talked up China Mobile as a fast-moving emerging-market stock that will continue to be subject to wild swings, thus its valuation will often be speculative.  However the also mention that China Mobile's competitors have been feeling their own sort of heat from the company's blistering pace of user and share growth. So far this year, it's captured more than 5 million new users per month. Even better, it signed up nearly 80% of all new mobile users in China, better even than its own estimate of 67.5% market share back in December 2006. That leaves China Unicom (NYSE: CHU), its only real mobile competitor, with a very tepid gain of just more than 20% of new mobile users, against its roughly one-third share at the beginning of the year.  China Mobile is on a huge bull run but just like any run, it peaks -- then what?

China Mobile (CHL.N) which controls two-thirds of China's mobile market, is expected to report on Oct. 22 that net profit from July to September jumped by over 32 percent to 21.09 billion yuan ($2.81 billion), according to six analysts polled by Reuters Estimates.  What if these guys miss?  Crash, boom, bang.  Then again, what if they don't?

Everyone is talking up China Mobile as the guy that is about to be passed up and watch it's market share get taken away by friendly competition.  It could happen and long-term, it will happen.  But for now, China Mobile is King, the end.

I'm afraid to bet against CHL and I'm afraid to get on the train.  If you are playing this stock going in to the call, best of luck. What a ride it's been, probably smart to cash out a few shares.  But if they do tank on Oct 22nd, you can bet this StockMaster will be buying on the dip.  The fact is China Mobile is the world's largest mobile phone operator ranked by number of subscribers, with over 296 million customers. By turnover it is second to Vodafone, which owns 3.3% of China Mobile. It is now the largest market capital company listed in the Hong Kong Stock Exchange, which exceeds that of HSBC.  If they do miss the call on the 22nd, the downstream impact could be scary, worse than Godzilla and his friends tearing up the streets of China. So if China Mobile does miss, expect people running in the streets and watch out for the Godzilla-like-robot-monster, he's more lethal with laser beam eyes and Gi-Joe Kung-Fu grip.

Frank Lara Jr.

Article by Frank Lara Jr.

Co-Founder of

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