China Unicom (CHU)
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 5/19/11 Sign up for free Cabot Wealth Advisory e-newsletter
My stock recommendation today is a Chinese company that presents an interesting mix of attractive qualities. It's China Unicom (CHU), a Hong Kong-based Chinese telecom company that has a total of 323 million subscribers, including 146 million wireline accounts and 177 million mobile subscribers, of which a little over 20 million are 3G accounts.
With sales of over $27 billion a year, China Unicom is a sizable business.
But the big opportunity here is reflected in the company's revenue structure, which was skewed 54% to fixed-line services in 2009, and 46% to mobile.
China Unicom's business mix is a result of a reshuffling of wireline and mobile responsibilities in 2008. China Unicom, which had been primarily a fixed-line service provider, was delegated a significant chunk of wireless business. Efforts to build out wireless infrastructure (cell towers, submarine cables, etc.) have kept a lid on earnings, with five declines in the last six quarters.
But as these infrastructure outlays slow and higher-margin 3G service becomes a larger part of the mix, investors are anticipating a sizable improvement in earnings growth.
Since the beginning of December 2010, CHU has soared from 12 to 20, with a nice intermediate base centering on 17 in February and March. The stock broke out to new multi-year highs in April and looks to be putting in a new base around 20. CHU isn't cheap, but it pays a small dividend and is the best available way to play the mobile revolution in China. It looks buyable on any dip below its 25-day moving average.
Editor's Note: Paul Goodwin is the editor of Cabot China & Emerging Markets Report, which was the #1 rated newsletter for five-year performance in 2009 and 2010, according to Hulbert Financial Digest. During that time, Paul nabbed his subscribers a 174% total return, while the Wilshire 5000 gained only 15.4%. And there's more to come. Click here to discover why Paul thinks this is THE year for his favorite Chinese stocks.
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report
A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years with a 17.9% annual return.
|China Unicom (Hong Kong) Limited
75th Floor The Center
99 Queens Road
852 2126 2018
|Index Membership: N/A
Industry: Wireless Communications
Full Time Employees: 215,820