Tuesday, August 25, 2009

Robert Hsu and CHL

Last week (August 20th) Robert Hsu closed his position with CHL. He realized a gain of almost 109%
Those who bought CHL back in December 2005 may be happy. If I followed this guru's advice I would be very disappointed for a simple reason: the missed profit is twice the realized one.
Those who bought it on October 2007 (when the genius was writing "Buy CHL under its increased limit of $100") should be quite angry... I would actually go at Mr. Hsu's place to kick his ass.

I am not going to show all the things Mr. Hsu wrote about CHL, but only a short summary, just to give you an idea of how this guy operates (or at leasts how he wants you to operate - I doubt he is putting his own money at stake, or he would be sleeping under a bridge by now).

December 2005: China Mobile (NYSE: CHL): There are only two state-owned enterprises worth investing in, and we’re going to talk about both of them now. SOEs are only worthy of our money when they are respectably run and have a monopoly (or close to it) in a growing sector. That describes China Mobile a nutshell. China currently has 400 million wireless handset users, and over 70% of them pay monthly fees to China Mobile. In addition, the market is growing more than 15% a year, and as bandwidth and those valueadded services improve, China Mobile stands to increase its fees and revenues. Buy CHL under $25 for at least 20% gains by the end of 2006.

January 11th 2006: China Mobile (NYSE: CHL) users sent a combined total of over 700 million short messages a day in 2005. That's right, a day! China Mobile's subscriber base grew by over three million each month in 2005, reaching 243 million by the end of November. China has the world's largest mobile phone market, with more than 377 million mobile phone subscribers, an average of 29 mobile phones per 100 people. CHL is far and away the dominant player and will be for the foreseeable future. Buy CHL under $25.

May 4th 2006: China Mobile (NYSE: CHL) plans to work directly with music companies to provide online service, which will cut most existing service providers (SPs) out of the deal. However, the company will leave some development space to other service providers and mainly concentrate on cooperation with large record companies. This news will help CHL's earnings and hurt smaller SPs. I believe that leading SPs such as Tom Online and KongZhong will still thrive given the explosive growth and size of the wireless services market. Buy CHL under $32.

November 16th 2006: China Mobile (NYSE: CHL): Is China Mobile trying to turn its mobile phones into the next Swiss Army knife? With the addition of some new all-purpose devices, it certainly seems that way. On Monday the company announced a new music-sharing service that will provide music, sports, and other content to mobile users. One interesting feature is that users will be able to upload their own self-produced songs to the Web for others to download. If that weren't enough, China Mobile has reached agreements with 19 domestic banks, including the Big Four banks, to jointly provide a mobile phone-based banking service called "Yin Xin Tong." Subscribers can use mobile phones to receive real-time financial information through text messages and other mobile data services. Paid service is expected to begin next year in Beijing. China Mobile led the Hong Kong market to new highs on November 15, closing with a market cap of $174 billion, making it the largest telecom company in the world. Buy CHL on pullbacks under $40.

January 11th 2007: China Mobile (NYSE: CHL): Just like China Aluminum, there's been talk of China Mobile going public on the red-hot Shanghai Stock Exchange. Last week we talked about the China Mobile IPO rumors that were floating around. The company finally came out and said that it won't be issuing A-shares on the Mainland—at least not in the next six months.
However, with the lure of potentially higher valuations and a greater domestic profile, I think it's only a matter of time before the company finally does go public in China. I don't think this will happen anytime soon, though. China Mobile won't list A-Shares until the government approves 3G licenses and the restructuring of the wireless industry is complete. I'll keep you posted on the situation as it develops. In the meantime, I think all of the speculation will give the stock a boost. Buy CHL when it's under $43.

May 10th 2007: China Mobile (NYSE: CHL) will put its EDGE (2.75G) network in Shanghai into commercial operation on May 17. This new technology will increase its current network transmission speed by roughly three times, which is great news for China Mobile customers. The company started EDGE services in Guangdong province exactly one year ago, while the networks in other cities remained in the testing stage until now.
Compared with China's homegrown 3G technology (called TD-SCDMA), EDGE is based on China Mobile's existing GSM network and can be upgraded to WCDMA 3G network technology in the future. EDGE can also supplement TD-SCDMA networks.
China Mobile plans to spend more than 10 billion yuan (or $1.3 billion) in upgrading EDGE networks in major cities throughout China. A nationwide network is expected to be completed by the end of this year.
China Mobile's cutting-edge technology proves that the company dominates China's communication sector. Continue to buy CHL under $50.

July 5th 2007: China Mobile (NYSE: CHL): After finally completing its 3G network construction in October, China Mobile is getting ready to provide 3G services to 2 million–3 million customers beginning at year-end into the start of 2008, and another 12 million customers should get 3G service in the first half of 2008. With that event on the horizon, it's looking like China's homegrown 3G technology will rapidly dominate the 3G market—whether or not the Chinese government decides to issue 3G licenses to mobile operators. Keep an eye on CHL and grab it when it's trading below $55.

October 25th 2007: China Mobile (NYSE: CHL) reported third-quarter earnings this week and the numbers were very impressive. Net income surged 38% to 22 billion yuan ($2.9 billion) from 15.9 billion yuan a year earlier. Sales jumped 21% to 91.9 billion yuan ($12.3 billion).
Driven by gains in rural areas, China Mobile added a record 48.4 million users in the first nine months of 2007 and a record 6.1 million in September. Controlling about two-thirds of China's wireless market, it had a total of 349.7 million subscribers by the end of September. The company is also boosting value-added services, such as ring tones, to keep urban customers.
With a market value of $367 billion, China Mobile is the world's fourth-biggest company. I believe China Mobile will continue to grow rapidly in the Chinese wireless market. Its biggest rival, China Unicom, isn't likely to catch up any time soon. Like many of our other stocks, I'm raising our buy limit for China Mobile. Buy CHL under its increased limit of $100.

March 13th 2008: China Mobile (NYSE: CHL) added a record 7 million new users in January, increasing its total number of subscribers to 376.4 million. CHL's major competitor, China Unicom, gained a mere 1.4 million additional subscribers, rounding off at 164 million. China Mobile continues to expand its network by venturing into smaller towns and villages, where fewer people are accustomed to mobile phones. CHL is a good buy under $80.

March 20th 2008: China Mobile (NYSE: CHL) reported strong fourth-quarter earnings on Wednesday. Net income rose 37% to 27.2 billion yuan ($3.8 billion) from 19.9 billion yuan during the same period a year ago, beating the 26-billion yuan estimate by analysts. Sales also increased 19% during the quarter to reach 98.5 billion yuan, up 82.7 billion yuan from last quarter.
For the full year of 2007, China Mobile's profit grew 32% to 87.1 billion yuan ($12.3 billion) from 66 billion yuan a year ago, while sales also increased 21% to 357 billion yuan. Its gross profit margin—one of my favorite indicators of a company's operating performance—improved to 54.3% from 54% in 2006.
These strong results are mostly due to a growing subscriber base. In 2007, China Mobile's total subscribers increased 23% to reach 369.3 million, as four out of five mobile users are now China Mobile customers. It is expected that the company will gain 80 million new users this year for a total of about 450 million subscribers by yearend.
Going forward, I expect China Mobile to gain more market share in lower-income rural areas. And I also believe that the company will maintain its profit growth by selling more value-added services in the urban areas. Continue to buy China Mobile under $80.

April 24th 2008: China Mobile (NYSE: CHL) reported strong first-quarter earnings early this week. Net income rose 37% to 24.1 billion yuan ($3.4 billion) from 17.6 billion yuan in the same period a year ago, beating analysts' estimate of 23.6 billion yuan. Revenues increased 20% to 93 billion yuan. The company's strong numbers were boosted by a record 6% subscriber growth in the quarter.
China Mobile continues to win subscribers from fixed-line companies such as China Telecom and China Netcom by removing charges for receiving calls and offering a variety of services. The company added 7.8 million users last month to a total of 392 million. It dominated the nation's mobile-phone market with 68% share.
I believe China's rapid economic growth and strong demand for mobile services will continue to drive China Mobile's business. Buy China Mobile under $90.

May 1st 2008: China Mobile (NYSE: CHL) announced this week that it will offer its 3G mobile services during the Summer Olympic Games in Beijing. As I have discussed before, I think that CHL has potential to become a leading provider of 3G mobile technology with its homegrown technology. And the exposure that the company will receive during the Olympic Games will surely give a boost to this goal. Buy China Mobile below $90.

October 23rd 2008: China Mobile (NYSE: CHL) reported that its third-quarter net income rose 26% to 27.8 billion yuan, or $4 billion, from 22 billion yuan a year earlier. This was slightly below Wall Street's estimate of 29 billion yuan. In addition, sales were 14% to 104.9 billion yuan, missing estimates of a 14.9% increase. CHL said that the lower profits were due to the addition of lower-spending users in rural areas, as well as slowing call volumes during the Olympics.
Even though CHL is growing a bit slower than in the past, I think it is too early to make a meaningful analysis of these results because of the distortion caused by the Olympics. So for now, buy CHL below $55.

August 20th 2009: This Week's Sells
China Mobile is the world's largest wireless telecommunication operator with 493 million customers, and it has been a core holding of our China Strategy portfolio ever since we first started the service in late 2005. But as the Chinese wireless market became increasingly saturated and policy makers became wary of the company's domination of China's telecom space, CHL's growth has gradually slowed. In the latest quarter, the company had its first decline in profit since 1999 after growth stalled and competition intensified.
Second-quarter net income fell to 30.1 billion yuan ($4.4 billion) from 30.6 billion yuan a year earlier -- that was short of the 31.1 billion yuan that analysts were expecting. And since the recent telecom industry shake-up, China Mobile's struggled to adapt to the technologically inferior homegrown 3G wireless standard, and it's received intense competition from fixed-line giant China Telecom when it entered the mobile-phone market as part of the industry revamp. This caused CHL's average monthly phone bill to plunge 11%. In addition, the company only added 15.96 million users in the second quarter, compared with 22.5 million a year earlier.
So, the combination of slower growth and lower revenue per customer has made the company's stock an underperformer this year. While China Mobile will offer 3G services in 238 cities by October, few customers are upgrading because of the company's less reliable homegrown TDS-CDMA technology. Considering this, I want you to sell CHL for a 109% gain.

For some people it was a 109% gaining trade. For others it was a 50% loss trade.

If you want additional details just put a comment to this post.


jack said...

My subscription ended early July 2009 and in either late June 09 or early July 09 He recommemded buying CHL and I see in your entry he sold CHL in august 09 so that's is a good pick.

You fail to mention when he all his sells and his re- buys so you are distorting the facts to favor you bias against Mr. Hse. Like all newsletter guys he gives his pick and you go or no go its you call if you just follow like a lemming then that's you choice but don't pass the blame to him when it's in you court to go or no go. Take personal responsibility and his picks don't suit you cancel it and go to the next newsletter or do you own research or reading.

Anonymous said...

I don't agree with you, Jack.
This guy wrote his subscribers to buy CHL under $100 just to sell it at $50 a few months later.