I’m not an economist, but who love “rojak”, putting all facts and available information on the table; to find out what’s what, if I get it right, rewards are to be attached by the market and vice-versa.
Recent two years, most of the main stream media have been reporting constantly about appreciation of China’s Yuan or RMB. However, emerged various vary opinions about its VALUE. Wondering how and based on what those VALUE are rated. The world seems trying to shake the rock; billion of hot money has been flushing in China, hoping for the RMB piggy back. How about those companies with significant amount of RMB such as China Mobile?
The below news; March 9 (Bloomberg) -- China’s yuan is facing increasing pressure to appreciate because of a widening interest-rate differential, the country’s top currency regulator said in a statement. The spread between China’s one-year deposit rate and its U.S. equivalent reached 1.43 percentage points today.
March 11 (Bloomberg) -- China’s inflation reached a 16- month high, Consumer prices rose 2.7 percent from a year earlier, the National Bureau of Statistics said in Beijing today.
Based on the news, certainly the RMB is on the appreciation journey. The world is fully aware about the contingent impacts and just like any of us, trying to seek for capital outlet to overcome the inflationary eroding. Thus, at this moment, letting the bank to generate profit from your saving is not a savvy act.
Come back to China Mobile, according to its Interim 2009 result, reported a net cash position of about RMB246 billion. If I’m sitting on such a cash pile, I don’t mind paying some fees to get some advices from the investment banker or fund manager; a better idea than putting my cash in the bank? China Mobile Took the 20% stake in Shanghai Pudong Development Bank (SPD) at per share of RMB18.03 or RMB39,801,430,722.30 seems created some blast-comments. Virtually, all negative calls for China Mobile. As a contrarian, I looked at the interim 2009 numbers again. Workout the number, after the 20% stake in SPD settled. China Mobile is still sitting on cash about RMB206 billion. Comparatively, the SPB 20% stake is too small to shake China Mobile. Don’t forget, the number is from Interim 2009, how about the China Mobile net profit from 30 June 2009 till now? I think the profit from these nine months “vacuum period”, would be able to add some aids to its cash position and untouched the dividend payout ratio.
The devil is in the details – Asking myself what’s the best estimation full year 2009profit forecast, I don’t know due to the low capacity of my research facility. The only equipment for me to outride others is, working hard to gain familiarity that derives a “feeling” towards the trend briefly.
Again, a glance of the Interim 2009 numbers, China Mobile had delivered a merely above RMB55 billion profit, how much going to be for the second half of the year, a period of six months when we were going through some festive seasons, tendency to consume more of the communication services.
Assuming: (1) The net profit is to be dropped 10% to about RMB50billion. (2) CAPEX for 3G is budgeted RMB10billion. (3) Balance cash of RMB40billion, it is enough to “off-set” the SPB 20% stake purchase amount included the fees involved.
Note: I don’t think the net profit is going to deteriorate, the number of subscriber had reached 527,398,000 as of 31 January 2010. Year 2020
The year of 2020, Malaysia is dreamed to be a developed nation. Meanwhile, Shanghai is emerged to be a world financial centre. What is the valuation for a Shanghai home-grown bank when Shanghai becomes the world financial centre? Or what is the valuation of SPB ten years later?
Lastly, as I always emphasized;
“The greatest risk in life is, not aware of what I don’t know.”
I don’t agree to those institutional on the theory of; no synergy for China Mobile to take the 20% stake in SPB.
I would rather recognize as harmless for China Mobile to have the 20% SPB. “In the long run, investing in the bank share is better than letting the bank profit from your saving.”
Conclusion is; the RMB VALUE is expecting to appreciate whereby the inflationary pressure is growing from strength to strength.
Investing in the China Banking business that able to generate some RMB dominated incomes should be priced at a premium multiple earnings ratio than keeping the cash, which would be eroded by inflationary in the long run.
China Mobile valuation shouldn’t be oppressed by the SPB 20% stake purchase. Rewarding or gruelling by the market, shall see in a week. China Mobile result is expecting to be announced next week.