About a year ago KGI Asia upgraded its recommendation on China Mobile's stock from 'accumulate' to 'buy' with a price target of HK$27.
KGI's report said the stock of the mainland's dominant mobile communications carrier had gone soft because of a series of negative factors, including the slowdown of cellular subscriptions in June last year, concerns over the increased competition from chief rival China Unicom's code division multiple access operations and the fund-switching pressure that resulted from the proposed listing of China Telecom.
The counter had fallen more than 25 per cent since its peak in May last year. However, China Mobile was trading at undemanding levels and 'the counter's upside potential is much higher than its downside risk at this price level'.
This May China Mobile (Hong Kong) for the first time reported single-digit profit, confirming investor concerns that the company's rate of growth is slowing after years of expansion. Average user revenue was stable but a market seen at near saturation point means the firm is relying on data services as a new source of growth.
It recorded 9.7 per cent year-on-year growth in net profit to 8.97 billion yuan for the three months to March 31. China Mobile also recorded its slowest growth rate of 10.1 per cent in revenue to reach 37.65 billion yuan.
The carrier signed 6.13 million users in the first quarter, bringing its total to 123.81 million. Users of its mobile data services increased 6.65 million to 64.38 million.
