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China Mobile & TenCent.....It's complicated,but

I looked at the market on Thursday, what surprised me the most was both China Mobile (941) and TenCent (700) were moved reciprocal against the market trend. Friday morning, many friends were checking around, what was going on to China Mobile?

In a glance of recent news, I had replied and stated it could be a good set of SPD result, which announced a 3 for 10 bonus issue and dividend of RMB1.50 per share, but why TenCent had been moving parallels against China Mobile two days in a row?

Checking is part of the job, verifying is part of the learning curve or experiences accumulation. Why I bother to put my trading trail/idea into writing? A lot of friends asked about it, simply because good habit is the only way to cultivate the trading discipline and the greatest asset is the discipline to stay discipline.

It’s a record for self revision and hoping to improve it from time to time. Best is someone could point out where I had gone wrong or dipped into any errors.

Every season has a reason
Kindly see the news below; In fact, it has been constantly flowing around the market if you have been the China Mobile audient.

03/02/2010 16:09
併購消息刺激騰訊股價急升6%,中移動澄清無意收購或入股


《經濟通通訊社3日專訊》中移動(00941)發言人向外電表示,無意全部或部分收購騰訊控股(00700)。

有報章報道,中移動董事長王建宙表明,不能排除與騰訊之間有股本合作之可能。受併購消息刺激,騰訊今日一度高見151﹒6元,收報150﹒4元,顯著上升5﹒99%。

上月初有內地傳媒報道,王建宙到訪騰訊位於深圳的總部,商討可能收購一事。中移動發言人則在上月初強調,去年12月底,王建宙是在正常交流拜訪的過程中會見騰訊管理層。(eh)


04/01/2010 09:45
中移動(00941)澄清沒有計劃收購騰訊(00700)


《經濟通通訊社4日專訊》有內地傳媒報道,中移動(00941)董事長兼首席執行官王建宙於上周四(31日)率領中國移動代表團抵達騰訊(00700)的深圳總部,就收購騰訊作進一步磋商。不過,中移動發言人作出澄清,指有關消息毫無根據,中移動沒有收購騰訊的意向。
據了解,王建宙曾到訪過深圳多家企業,不只有騰訊一家。

據有關報道,中移動一直有收購騰訊的想法,但因中移動體制問題及騰訊不滿收購條件而未能成事。但隨着中移動即時短訊服務「飛信」需強制對外開放,進軍互聯網亦不順利,使中移動考慮收購有皇牌QQ在手的騰訊。(jw)


So, pretty obvious that the M&A angel is cooking behind the sense. Even though, China Mobile had been denied it, but the takeover news had been flowing around for the last couple of months. I think it is just same like most other countries, denying doesn’t help because insiders had been waving the price.

“Insider trading is just like having an affair, hate and criticizes others when you are not having it, addicted to it when you are having it. I’m here by not having any insider trading in Chine Mobile or TenCent, but to observe the insider trading.”

Why TenCent?
Briefly, I’m so sorry to say; my understanding toward the TenCent business model is equally like the layman. Thus, please DIY, knowing further about the TenCent business.

On the other hand, I had checked with the industry analysts, concluded the merger in between both companies business is like “如虎添翼”, direct translation is like putting a pair of wings onto a tiger. Or perfect synergy to be precise.
NOTE: Those are young analyst views.

However, saliva is flowing out non-stopping when you look into the TenCent number carefully.

The average net profit margin for its business model is approximately 38%, which attached with an average growth rate of about 58% for the last five years since listed in year 2004.

Very tame total borrowing of merely above RM470 million with backed by net cash position of RMB11.5 billion as of FY-end 2009.

Market capitalization is standing at HK$295,123,290,691.20 as of last Friday at the closing price of HK$161.40. Trading at high P/E of about 49.5x with the support of its high PEG.

Therefore, I’m interested to become TeCent shareholder if the price is reasonable.

How about any clue from China Mobile?
The most recent interview of China Mobile CEO during the recent press conference just after the SPD 20% stake acquisition. As below statement is indicating the future direction of its acquisition; 20 March 2010


“對於未來的並購,我可以明確表態,中國移動不會投資地產、能源等非電信主業的產業。我們的收購一直集中於電信業務,未來也會繼續探索並購目標,能夠通過並購充分發揮公司主業的協同效應,並提高公司EPS。對於並購,我們一直很謹慎,目前暫時還沒有新的目標。”

“If you talk to a man in a language he understands, that goes to his head. If you speak to him in his language, that goes into is heart.” – Nelson Mandela.

Pal, sorry about maintaining the original statement in Mandarin. I’m totally agreed with Nelson Mandela in the above mentioned quote. Please use Google translate, if you need to understand the original juice.

Thus, looking at both share prices performance since last Thursday till today’s before lunch; China Mobile and TenCent rested at HK$80 +$0.70 and HK$163.60 +HK$2.20 respectively. I think the insiders are accumulating.

How the takeover mechanism works?
Putting down the market capitalization as of current price;
(a) TenCent at HK$163.6 is HK$299,146,036,908.80
(b) China Mobile at HK$80.00 is HK$1,604,915,124,880.00
Comparatively, China Mobile is about 18 times bigger than TenCent in term of market capitalization.

Therefore, share issuing could be an idea mechanism to take over TenCent.

Also Very much depends on;
(a) What is the valuation post merger?
(can work out a post merger model)
(b) How much China Mobile is willing to pay?
(c) Whether the Chinese government is involved in the merger?

If the government is involved, the deal is pretty easy to go through.

My strategy is
China Mobile, buy on weakness, regardless whatsoever rumours are flowing around. The bottom line is this company has plenty of cash even post 20% stake SPD acquisition. Most importantly, China Mobile is in the acquire mode, which had been expressed by its’ CEO in many occasions.

It's just an idea from the share prices reflective, which came across my head for your perusal. Please tell me if I'm wrong.
thanks & regards
China Mobile TenCent It's complicated but
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