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Lucas McGee

 
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  • The Chinese Telecom Growth Story, Part 2 [View article]
    I haven't looked at it, but thanks for the note. I'll take a look.
    Nov 24, 2010. 06:45 PM | Likes Like |Link to Comment
  • The Chinese Telecom Growth Story, Part 2 [View article]
    That's fair. I guess we'll just see how fast CHL sinks and CHA rises. My guess is that CHL doesn't sink so much as slow down.
    Nov 24, 2010. 06:43 PM | Likes Like |Link to Comment
  • The Chinese Telecom Growth Story, Part 2 [View article]
    Yes, CHU is benefiting from Apple's partnership right now. But I think it's also important to look over the long-term. At some point, Apple may very well end its exclusivity with CHU, and the Apple effect may be somewhat temporary with CHU.
    Nov 24, 2010. 06:41 PM | Likes Like |Link to Comment
  • The Chinese Telecom Growth Story, Part 1 [View article]
    I'm a yuan bull, so it's always nice to be invested in a company that generates its earnings in yuan.

    On price/sales, I don't really monitor that. I don't think price/sales is an important metric, personally.

    You're right that they're similarly valued when compared to Telefonica and Vodaphone, but I'd argue that the future is brighter for CHL than for the giant European wireless providers. The bulk of Vodaphone's and Telefonica's revenues are from Europe, which are saturated markets with mediocre long-term futures for wireless providers. China remains underpentrated, and there is probably 4-5 years of runway before the Chinese market becomes adequately penetrated.
    Nov 10, 2010. 09:29 PM | Likes Like |Link to Comment
  • The Chinese Telecom Growth Story, Part 1 [View article]
    You're right that the technology difference will play a bigger role in 2011, but if we're looking at CHL from the perspective of a discounted cash flow or an earnings multiple in 2013 or 2014, the more important factor is who has the technological advantage after 2011. In 2011 or 2012, wireless providers around the world are going to switch to 4G. At that point, I think that CHL will be able to upgrade adequately and the technological difference between CHL and its competitors will narrow.

    In a sense, the low P/E multiple may seem justified in the event of weak 2011 operating trends. But if you're a long-term investor, you'll be rewarded by the fact that the market will at some point begin looking beyond 2011, and when it does, you'll be able to capture that upside.
    Nov 10, 2010. 09:23 PM | Likes Like |Link to Comment
  • The Chinese Telecom Growth Story, Part 1 [View article]
    Thanks for your comment.

    While margins are going down and subscriber growth rates are declining, I still believe that revenue and profitability will continue to grow. The growth is only slowing down, not going negative. In my next part, I'll provide a deeper look into each telecom's financials, and one of the things I'll note is that the most recent quarter for CHL still saw healthy top-line and earnings growth, even if it was lower growth when compared to CHL's prior quarters.

    The attraction to CHL is its valuation. Its valuation is dirt cheap on virtually every metric, with low P/E, TEV/EBITDA, TEV/FCF, etc. The company generates substantial cash, pays a dividend, and is still growing, and the valuation multiples are simply too low.

    The other thing to remember is that the government's efforts to equalize the playing field are focused on technology. When the transition to 4G begins in 2011, CHL should be well-positioned to become a technology leader once again, and that should fuel continued growth. At its current low valuation multiples, I think the stock price has plenty of upside as quarterly metrics continue to grow. I'm just not sure how much lower the valuation multiples can go if profitability keeps increasing year after year.
    Nov 9, 2010. 07:49 PM | 1 Like Like |Link to Comment
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