Thursday, January 29, 2009

Robert Hsu sells CHU

New look but old results for Robert Hsu's $3.000/year Asia Edge newsletter.
This time Mr. Hsu is losing some 20% on CHU.

He decided it was time to buy CHU on December 3rd 2008.

New Buy: China Unicom

As you know, China has the world's largest population with about 1.3 billion people. So it's no surprise that China also has the world's biggest mobile market with nearly 600 million users. That's almost double the size of the total population of the U.S. And with nearly half of China's population still without a cell phone, you can see that the telecom industry in China still has tremendous potential.

In addition, [blah blah blah].

That's why I am recommending China Unicom this week as a way to take advantage of the booming telecom industry and the build out of 3G networks in China.

Based in Hong Kong, China Unicom is an integrated telecom service provider [blah blah blah].

For the first half of 2008, China Unicom's revenue grew 4% to 35 billion yuan ($5.1 billion) from the same period of last year, while profit doubled to 4.4 billion yuan from 2.2 billion yuan. Its revenue derived from GSM mobile value-added service increased by 22%, and represented 24% of service revenue from GSM mobile business. In addition, the company carries very small debt, and its debt-to-capitalization ratio was just 3.5% at the end of June.

Future Growth

Given its technology advantage and its imminent 3G license, I'm confident that China Unicom will be successful in the New Year. In fact, [blah blah blah].

China Unicom will definitely be one of the major beneficiaries from the upcoming 3G license issuance. And it doesn't hurt that the increase of foreign ownership in the company is a long-term strategic commitment, which I believe is positive for China Unicom. I want you to buy CHU under $12. I'm targeting a nice 25%+ gain in the next four to six months.

Buy price was $12.08.

December 10th
On our Asia Edge buy list, China Unicom (NYSE: CHU), ********* ***** (NYSE: ***), and the iShares ******* **** ****** (NYSE: ***) all fit into this category. And they are the best places to be putting your money right now.
Buy Below $12

December 17th
China Unicom (NYSE: CHU) will benefit from the announcement by the information and industry ministry that China will issue third-generation mobile wireless licenses by the end of 2008 or early next year. As we've discussed before, China Unicom will run networks with WCDMA platforms, while China Mobile will run the TD-SCDMA platform and China Telecom will run the CDMA platform.
Overall, China will invest a total of 800 billion yuan ($116 billion) to provide these third-generation mobile services. And China Unicom, itself, has already passed a budget of RMB 80 billion for WCDMA network construction next year. China Unicom continues to be a great way to take advantage of the 3G network build-outs in China. Continue to buy CHU on dips under $12.

December 24th
Buy under $12

December 31st
China Unicom (NYSE: CHU) said last week that its GSM mobile phone users increased 996,000 during November. Its GSM mobile phone subscribers now totals 133 million users. In addition, the company's local phone users increased by 1.52 million, bringing the company's total to 105 million. And CHU's broadband users jumped 234,000 to 25.43 million.
The increase in users is a bullish sign for CHU. I expect the company to grow and perform well in 2009. Continue to buy CHU on dips under $12.

January 7th
China Unicom (NYSE: CHU) said today that its merger with China Netcom has been completed. The deal is part of the Chinese government's restructuring of the telecom market last year. Armed with its new 3G license, China Unicom will likely grow faster than its rivals in the future. Buy CHU under $12.

January 14th
China Unicom (NYSE: CHU) will launch its 3G technology service in May in 55 cities. By the end of this year, the company plans to have the service launched in 280 cities. CHU is investing at least 60 billion yuan ($8.78 billion) to develop its 3G network this year, and another 40 billion yuan next year. And it looks for the 3G business to become profitable next year. Right now, CHU shares are down a bit, as investors sold Chinese wireless stocks into the 3G announcement, anticipating large capital expenditure from the operators. But in the long term, I think the investment will pay off for CHU. Buy CHU under $12.

January 21st
China Unicom (NYSE: CHU) will launch its 3G services on May 17 in 55 Chinese cities. Its current mobile users will be able to switch to the new technology that day, and new users will be able to sign up, too.
In other news, CHU said that its mobile subscribers jumped last month to 133.37 million. In addition, CHU said that December saw a drop in subscribers to both its fixed line and broadband services. CHU had 100.15 million fixed line subscribers, down 4.87 million from November, while its broadband user base dropped by 22,000 to 25.42 million. This was the first time a Chinese operator recorded a loss in high-speed internet users in 2008. Fixed-line is a declining business in China, so I am not concerned about these developments. And the Broadband loss is miniscule compared to the company's gains in mobile subscribers.
The stock dove 12% on Monday due to investors overselling. So for right now, I want you to hold CHU.

January 28th
China Unicom (NYSE: CHU) said that it expects its 2008 profit to have increased by more than 50%, mainly because it sold some of its operations last year. That includes selling its CDMA operations to China Telecom for 43.8 billion yuan in October.
The stock has bounced in the past four sessions following the sharp sell-off after China's 3G-license approval. If you recall, I thought the 3G license would add nicely to CHU's bottom line, and that it would receive the most advanced 3G mobile-phone network license from the Chinese government. But because of the higher-than-expected costs to upgrade their 3G infrastructure, the company has been struggling in recent weeks.
So I recommend that we use the current bounce – shares are up 9% in the past five days -- to sell China Unicom and put the proceeds to work in Mittal Arcelor. Sell CHU.

Close price was $9.51.

Mr. Hsu's target: +25%
Actual result: -21%

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