China Mobile tipped to hit HK$200

Shares of China Mobile - 10 years after closing on their debut at HK$10.55 - ended at a record high of HK$149.70 yesterday on strong quarterly earnings growth and as some analysts raised earnings forecasts.

The shares of the nation's largest mobile-telephone operator may reach HK$200 in 12 months, according to ABN Amro.

China Mobile's third-quarter net profit, announced after the market closed on Monday, rose 37 per cent to 21.9 billion yuan on a 21 per cent leap in revenue to 91.88 billion yuan.

Investors responded by driving the stock to an intraday high of HK$150 before it closed up HK$7.50 or 5.27 per cent.

The strong rebound came after the shares slid 3.85 per cent on Monday amid a general market decline.

ABN Amro, the first to set China Mobile's target at HK$200, estimated the share price would have a 50 per cent upside potential in the next 12 months due to the company's pending return to the A-share market and a possible share split.

'We expect China Mobile shares to benefit from mainland investors' preference for stable and visible growth and for well-run and well-known national champions,' ABN Amro head of telecommunications research Wendy Liu said in a report.

The target price valued China Mobile at 34 times 2008 estimated profit. Ms Liu estimates 2008 profit at 108 billion yuan. She also believed the management would consider a share split once the return to the A-share market was confirmed.

Merrill Lynch said the addition of more than 6.1 million subscribers last month was above the bank's estimate. It expects the strong momentum to taper off beyond 2010.

Goldman Sachs forecast China Mobile's strong earnings growth would continue but that macroeconomic factors would affect the share price performance.