Intrinsic value of China Mobile ADR - CHL

Previous Close

$53.39

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$53.39

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CHL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 215.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.00
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  102,489
  685,712
  705,186
  726,736
  750,358
  776,061
  803,866
  833,806
  865,925
  900,275
  936,918
  975,923
  1,017,369
  1,061,342
  1,107,934
  1,157,248
  1,209,392
  1,264,483
  1,322,646
  1,384,014
  1,448,728
  1,516,937
  1,588,800
  1,664,485
  1,744,169
  1,828,038
  1,916,290
  2,009,133
  2,106,786
  2,209,479
  2,317,456
Variable operating expenses, $m
 
  562,192
  578,058
  595,615
  614,860
  635,800
  658,453
  682,846
  709,013
  736,999
  766,852
  795,096
  828,863
  864,688
  902,647
  942,824
  985,306
  1,030,189
  1,077,575
  1,127,572
  1,180,295
  1,235,866
  1,294,414
  1,356,076
  1,420,995
  1,489,324
  1,561,224
  1,636,865
  1,716,424
  1,800,089
  1,888,058
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  85,405
  562,192
  578,058
  595,615
  614,860
  635,800
  658,453
  682,846
  709,013
  736,999
  766,852
  795,096
  828,863
  864,688
  902,647
  942,824
  985,306
  1,030,189
  1,077,575
  1,127,572
  1,180,295
  1,235,866
  1,294,414
  1,356,076
  1,420,995
  1,489,324
  1,561,224
  1,636,865
  1,716,424
  1,800,089
  1,888,058
Operating income, $m
  17,084
  123,520
  127,128
  131,121
  135,498
  140,261
  145,413
  150,960
  156,911
  163,276
  170,066
  180,827
  188,507
  196,654
  205,287
  214,424
  224,086
  234,294
  245,071
  256,441
  268,432
  281,071
  294,386
  308,409
  323,174
  338,714
  355,066
  372,269
  390,363
  409,390
  429,397
EBITDA, $m
  37,134
  260,186
  267,575
  275,752
  284,715
  294,468
  305,018
  316,379
  328,566
  341,600
  355,503
  370,304
  386,030
  402,715
  420,394
  439,105
  458,891
  479,794
  501,864
  525,149
  549,704
  575,585
  602,853
  631,571
  661,806
  693,629
  727,116
  762,344
  799,397
  838,363
  879,333
Interest expense (income), $m
  34
  400
  1,461
  2,651
  3,968
  5,411
  6,982
  8,681
  10,511
  12,474
  14,573
  16,813
  19,196
  21,729
  24,416
  27,264
  30,278
  33,464
  36,831
  40,385
  44,136
  48,091
  52,259
  56,651
  61,276
  66,146
  71,271
  76,665
  82,339
  88,306
  94,582
Earnings before tax, $m
  20,900
  123,120
  125,668
  128,471
  131,530
  134,849
  138,430
  142,279
  146,400
  150,802
  155,492
  164,015
  169,310
  174,925
  180,871
  187,161
  193,809
  200,830
  208,240
  216,056
  224,296
  232,980
  242,127
  251,759
  261,898
  272,568
  283,795
  295,604
  308,024
  321,084
  334,815
Tax expense, $m
  5,154
  33,243
  33,930
  34,687
  35,513
  36,409
  37,376
  38,415
  39,528
  40,717
  41,983
  44,284
  45,714
  47,230
  48,835
  50,533
  52,328
  54,224
  56,225
  58,335
  60,560
  62,905
  65,374
  67,975
  70,712
  73,593
  76,625
  79,813
  83,166
  86,693
  90,400
Net income, $m
  15,732
  89,878
  91,737
  93,784
  96,017
  98,440
  101,054
  103,863
  106,872
  110,086
  113,509
  119,731
  123,597
  127,695
  132,036
  136,627
  141,480
  146,606
  152,015
  157,721
  163,736
  170,075
  176,753
  183,784
  191,185
  198,975
  207,170
  215,791
  224,858
  234,391
  244,415

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  66,203
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  220,045
  1,031,145
  1,060,430
  1,092,837
  1,128,358
  1,167,009
  1,208,820
  1,253,843
  1,302,143
  1,353,797
  1,408,899
  1,467,554
  1,529,879
  1,596,003
  1,666,067
  1,740,223
  1,818,635
  1,901,478
  1,988,942
  2,081,224
  2,178,538
  2,281,108
  2,389,173
  2,502,985
  2,622,810
  2,748,930
  2,881,640
  3,021,253
  3,168,100
  3,322,525
  3,484,896
Adjusted assets (=assets-cash), $m
  153,842
  1,031,145
  1,060,430
  1,092,837
  1,128,358
  1,167,009
  1,208,820
  1,253,843
  1,302,143
  1,353,797
  1,408,899
  1,467,554
  1,529,879
  1,596,003
  1,666,067
  1,740,223
  1,818,635
  1,901,478
  1,988,942
  2,081,224
  2,178,538
  2,281,108
  2,389,173
  2,502,985
  2,622,810
  2,748,930
  2,881,640
  3,021,253
  3,168,100
  3,322,525
  3,484,896
Revenue / Adjusted assets
  0.666
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
Average production assets, $m
  100,426
  705,597
  725,636
  747,812
  772,119
  798,566
  827,178
  857,986
  891,037
  926,383
  964,089
  1,004,225
  1,046,873
  1,092,121
  1,140,064
  1,190,808
  1,244,464
  1,301,153
  1,361,003
  1,424,150
  1,490,741
  1,560,928
  1,634,875
  1,712,755
  1,794,750
  1,881,051
  1,971,863
  2,067,398
  2,167,883
  2,273,554
  2,384,662
Working capital, $m
  7,270
  -445,713
  -458,371
  -472,379
  -487,733
  -504,439
  -522,513
  -541,974
  -562,851
  -585,179
  -608,997
  -634,350
  -661,290
  -689,872
  -720,157
  -752,211
  -786,105
  -821,914
  -859,720
  -899,609
  -941,673
  -986,009
  -1,032,720
  -1,081,915
  -1,133,710
  -1,188,225
  -1,245,589
  -1,305,937
  -1,369,411
  -1,436,162
  -1,506,346
Total debt, $m
  723
  18,258
  33,134
  49,597
  67,642
  87,276
  108,517
  131,388
  155,924
  182,165
  210,157
  239,953
  271,615
  305,205
  340,798
  378,469
  418,302
  460,387
  504,818
  551,698
  601,133
  653,239
  708,136
  765,952
  826,824
  890,892
  958,309
  1,029,233
  1,103,831
  1,182,279
  1,264,763
Total liabilities, $m
  78,408
  523,822
  538,698
  555,161
  573,206
  592,840
  614,081
  636,952
  661,488
  687,729
  715,721
  745,517
  777,179
  810,769
  846,362
  884,033
  923,866
  965,951
  1,010,382
  1,057,262
  1,106,697
  1,158,803
  1,213,700
  1,271,516
  1,332,388
  1,396,456
  1,463,873
  1,534,797
  1,609,395
  1,687,843
  1,770,327
Total equity, $m
  141,637
  507,324
  521,732
  537,676
  555,152
  574,168
  594,740
  616,891
  640,654
  666,068
  693,178
  722,037
  752,700
  785,233
  819,705
  856,190
  894,768
  935,527
  978,559
  1,023,962
  1,071,841
  1,122,305
  1,175,473
  1,231,469
  1,290,423
  1,352,473
  1,417,767
  1,486,457
  1,558,705
  1,634,682
  1,714,569
Total liabilities and equity, $m
  220,045
  1,031,146
  1,060,430
  1,092,837
  1,128,358
  1,167,008
  1,208,821
  1,253,843
  1,302,142
  1,353,797
  1,408,899
  1,467,554
  1,529,879
  1,596,002
  1,666,067
  1,740,223
  1,818,634
  1,901,478
  1,988,941
  2,081,224
  2,178,538
  2,281,108
  2,389,173
  2,502,985
  2,622,811
  2,748,929
  2,881,640
  3,021,254
  3,168,100
  3,322,525
  3,484,896
Debt-to-equity ratio
  0.005
  0.040
  0.060
  0.090
  0.120
  0.150
  0.180
  0.210
  0.240
  0.270
  0.300
  0.330
  0.360
  0.390
  0.420
  0.440
  0.470
  0.490
  0.520
  0.540
  0.560
  0.580
  0.600
  0.620
  0.640
  0.660
  0.680
  0.690
  0.710
  0.720
  0.740
Adjusted equity ratio
  0.490
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492
  0.492

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15,732
  89,878
  91,737
  93,784
  96,017
  98,440
  101,054
  103,863
  106,872
  110,086
  113,509
  119,731
  123,597
  127,695
  132,036
  136,627
  141,480
  146,606
  152,015
  157,721
  163,736
  170,075
  176,753
  183,784
  191,185
  198,975
  207,170
  215,791
  224,858
  234,391
  244,415
Depreciation, amort., depletion, $m
  20,050
  136,666
  140,447
  144,631
  149,217
  154,207
  159,606
  165,419
  171,654
  178,324
  185,438
  189,476
  197,523
  206,061
  215,106
  224,681
  234,805
  245,501
  256,793
  268,708
  281,272
  294,515
  308,467
  323,161
  338,632
  354,915
  372,050
  390,075
  409,035
  428,973
  449,936
Funds from operations, $m
  34,308
  226,544
  232,184
  238,414
  245,234
  252,647
  260,660
  269,282
  278,527
  288,409
  298,947
  309,207
  321,120
  333,756
  347,142
  361,308
  376,285
  392,106
  408,808
  426,429
  445,008
  464,590
  485,220
  506,945
  529,817
  553,890
  579,220
  605,866
  633,892
  663,364
  694,351
Change in working capital, $m
  -2,395
  -11,295
  -12,658
  -14,008
  -15,354
  -16,707
  -18,073
  -19,461
  -20,877
  -22,328
  -23,818
  -25,354
  -26,940
  -28,582
  -30,285
  -32,054
  -33,894
  -35,809
  -37,806
  -39,889
  -42,064
  -44,336
  -46,711
  -49,195
  -51,794
  -54,515
  -57,364
  -60,348
  -63,474
  -66,751
  -70,185
Cash from operations, $m
  36,703
  224,584
  244,842
  252,422
  260,589
  269,354
  278,733
  288,743
  299,404
  310,737
  322,765
  334,561
  348,060
  362,338
  377,427
  393,362
  410,178
  427,915
  446,614
  466,318
  487,072
  508,926
  531,931
  556,140
  581,612
  608,405
  636,584
  666,214
  697,366
  730,114
  764,536
Maintenance CAPEX, $m
  0
  -129,748
  -133,132
  -136,913
  -141,097
  -145,683
  -150,673
  -156,071
  -161,884
  -168,120
  -174,789
  -181,904
  -189,476
  -197,523
  -206,061
  -215,106
  -224,681
  -234,805
  -245,501
  -256,793
  -268,708
  -281,272
  -294,515
  -308,467
  -323,161
  -338,632
  -354,915
  -372,050
  -390,075
  -409,035
  -428,973
New CAPEX, $m
  -27,598
  -17,932
  -20,039
  -22,175
  -24,307
  -26,448
  -28,611
  -30,809
  -33,050
  -35,346
  -37,706
  -40,137
  -42,648
  -45,248
  -47,944
  -50,744
  -53,656
  -56,689
  -59,850
  -63,147
  -66,590
  -70,187
  -73,947
  -77,880
  -81,995
  -86,302
  -90,812
  -95,535
  -100,485
  -105,671
  -111,108
Cash from investing activities, $m
  -28,142
  -147,680
  -153,171
  -159,088
  -165,404
  -172,131
  -179,284
  -186,880
  -194,934
  -203,466
  -212,495
  -222,041
  -232,124
  -242,771
  -254,005
  -265,850
  -278,337
  -291,494
  -305,351
  -319,940
  -335,298
  -351,459
  -368,462
  -386,347
  -405,156
  -424,934
  -445,727
  -467,585
  -490,560
  -514,706
  -540,081
Free cash flow, $m
  8,561
  76,904
  91,672
  93,334
  95,185
  97,223
  99,449
  101,863
  104,469
  107,270
  110,270
  112,521
  115,935
  119,567
  123,423
  127,512
  131,841
  136,422
  141,264
  146,377
  151,774
  157,467
  163,469
  169,793
  176,456
  183,471
  190,857
  198,629
  206,807
  215,409
  224,456
Issuance/(repayment) of debt, $m
  -249
  13,263
  14,877
  16,463
  18,045
  19,634
  21,240
  22,872
  24,536
  26,240
  27,992
  29,797
  31,661
  33,591
  35,592
  37,671
  39,833
  42,085
  44,431
  46,879
  49,435
  52,106
  54,897
  57,816
  60,871
  64,069
  67,417
  70,924
  74,598
  78,448
  82,484
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -285
  13,263
  14,877
  16,463
  18,045
  19,634
  21,240
  22,872
  24,536
  26,240
  27,992
  29,797
  31,661
  33,591
  35,592
  37,671
  39,833
  42,085
  44,431
  46,879
  49,435
  52,106
  54,897
  57,816
  60,871
  64,069
  67,417
  70,924
  74,598
  78,448
  82,484
Total cash flow (excl. dividends), $m
  8,327
  90,167
  106,548
  109,797
  113,230
  116,858
  120,689
  124,735
  129,005
  133,511
  138,262
  142,317
  147,596
  153,158
  159,015
  165,183
  171,675
  178,507
  185,695
  193,257
  201,209
  209,573
  218,366
  227,610
  237,327
  247,540
  258,274
  269,553
  281,404
  293,857
  306,940
Retained Cash Flow (-), $m
  -8,924
  -12,327
  -14,408
  -15,944
  -17,477
  -19,016
  -20,571
  -22,151
  -23,763
  -25,414
  -27,110
  -28,858
  -30,664
  -32,533
  -34,471
  -36,485
  -38,579
  -40,759
  -43,032
  -45,403
  -47,878
  -50,465
  -53,168
  -55,995
  -58,954
  -62,051
  -65,293
  -68,690
  -72,248
  -75,977
  -79,886
Prev. year cash balance distribution, $m
 
  422,339
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  500,179
  92,140
  93,853
  95,753
  97,842
  100,118
  102,584
  105,242
  108,097
  111,152
  113,459
  116,932
  120,625
  124,544
  128,698
  133,096
  137,748
  142,663
  147,854
  153,331
  159,108
  165,198
  171,614
  178,373
  185,489
  192,980
  200,863
  209,156
  217,879
  227,053
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  479,558
  84,352
  81,677
  78,843
  75,839
  72,660
  69,304
  65,779
  62,096
  58,273
  53,880
  49,899
  45,864
  41,812
  37,784
  33,823
  29,972
  26,273
  22,765
  19,484
  16,457
  13,707
  11,248
  9,085
  7,216
  5,630
  4,311
  3,236
  2,378
  1,710
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

China Mobile Limited, an investment holding company, provides mobile telecommunications and related services in Mainland China and Hong Kong. It offers voice services comprising local calls, domestic and international long distance calls, intra-provincial roaming, inter-provincial roaming, and international roaming, as well as voice value-added services, including caller identity display, caller restrictions, call waiting, call forwarding, call holding, voice mail, conference calls, and others. The company also offers data services, such as SMS, including subscriber-to-subscriber messages, short messages, and others; MMS services; wireless mobile phone data traffic and WLAN data traffic services; and applications and information services, including mobile music, mobile paper, mobile reading, mobile video, mobile market, etc. In addition, it offers telecommunications network planning design and consulting services; roaming clearance services; technology platform development and maintenance services; and system integration and development solutions, as well as operates a network and business coordination center. Further, the company is involved in network planning and optimizing construction testing and supervising activities; technology support; development and training of mobile communication systems; and providing electronic communication products, non-banking financial services, and call center services, as well as computer hardware and software research and development services. The company was formerly known as China Mobile (Hong Kong) Limited and changed its name to China Mobile Limited in May 2006. The company was incorporated in 1997 and is based in Central, Hong Kong. China Mobile Limited is a subsidiary of China Mobile Hong Kong (BVI) Limited.

FINANCIAL RATIOS  of  China Mobile ADR (CHL)

Valuation Ratios
P/E Ratio 69.5
Price to Sales 10.7
Price to Book 7.7
Price to Tangible Book
Price to Cash Flow 29.8
Price to Free Cash Flow 120.1
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.3%
Financial Strength
Quick Ratio 92
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0.5%
Interest Coverage 616
Management Effectiveness
Return On Assets 7.4%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 11.4%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 12.2%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 79.1%
Gross Margin - 3 Yr. Avg. 80.6%
EBITDA Margin 40%
EBITDA Margin - 3 Yr. Avg. 41%
Operating Margin 16.7%
Oper. Margin - 3 Yr. Avg. 16.7%
Pre-Tax Margin 20.4%
Pre-Tax Margin - 3 Yr. Avg. 21.3%
Net Profit Margin 15.3%
Net Profit Margin - 3 Yr. Avg. 16.1%
Effective Tax Rate 24.7%
Eff/ Tax Rate - 3 Yr. Avg. 24.1%
Payout Ratio 43.2%

CHL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHL stock intrinsic value calculation we used $668335 million for the last fiscal year's total revenue generated by China Mobile ADR. The default revenue input number comes from 2016 income statement of China Mobile ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CHL stock valuation model: a) initial revenue growth rate of 2.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CHL is calculated based on our internal credit rating of China Mobile ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of China Mobile ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CHL stock the variable cost ratio is equal to 82%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CHL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8% for China Mobile ADR.

Corporate tax rate of 27% is the nominal tax rate for China Mobile ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CHL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CHL are equal to 102.9%.

Life of production assets of 5.3 years is the average useful life of capital assets used in China Mobile ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CHL is equal to -65%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $917336 million for China Mobile ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 4038.19 million for China Mobile ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of China Mobile ADR at the current share price and the inputted number of shares is $215.6 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
CHU China Unicom ( 15.04 prem.  prem.
CHA China Telecom 48.61 prem.  prem.
VOD Vodafone Group 28.79 prem.  prem.
ERIC Ericsson ADR 7.24 prem.  prem.
VIP VimpelCom ADR 4.05 prem.  prem.

COMPANY NEWS

▶ Why We Remain Bullish On China Telecom   [Jun-01-17 01:48PM  Forbes]
▶ 3 Top Dividend Stocks to Invest in China's Growth   [May-23-17 07:10AM  Motley Fool]
▶ ETFs with exposure to China Mobile Ltd. : May 1, 2017   [May-01-17 03:46PM  Capital Cube]
▶ 3 Stocks That Will Hate a 15% Corporate Tax Rate   [Apr-27-17 09:06AM  Motley Fool]
▶ China Mobile Denies Interest in Singapore Telco M1   [Apr-26-17 10:35AM  TheStreet.com]
▶ Why China's Mobile's Weak Results Hurt China Unicom   [Apr-21-17 11:14AM  Barrons.com]
▶ ETFs with exposure to China Mobile Ltd. : April 19, 2017   [Apr-19-17 02:15PM  Capital Cube]
▶ Is Slower Growth in China a New Standard?   [11:38AM  Market Realist]
▶ China Mobile Ltd. Wants More Broadband Customers   [Mar-24-17 03:57PM  Motley Fool]
▶ China Mobile Slips 3% As Dividends Disappoint   [Mar-23-17 02:06AM  Barrons.com]
▶ China Mobile Slips 3% As Dividends Disappoint   [02:06AM  at Barrons.com]
▶ What Happened to China Mobile on March 20?   [03:58PM  Market Realist]
▶ What Happened to China Mobile on March 20?   [03:58PM  at Market Realist]
▶ 10 Reasons to Buy China Mobile Ltd. and Never Sell   [Mar-19-17 12:35PM  Motley Fool]
▶ China Unicom Soars After Slashing Capex: Dividends?   [Mar-15-17 10:00PM  at Barrons.com]
▶ A New Journey of GTI: Joint Innovation Towards 5G   [Mar-01-17 06:00AM  PR Newswire]
▶ [$$] Apple, Samsung Need to Dazzle in a Slow Market   [Feb-24-17 02:29PM  at The Wall Street Journal]
▶ 10 Most Valuable Brands in China   [Jan-27-17 01:17PM  at Insider Monkey]
▶ [$$] China Mobile Can Dial Up 25% Upside   [Jan-26-17 08:41PM  at Barrons.com]
▶ 11 Most Profitable Companies in China   [Jan-25-17 09:13AM  at Insider Monkey]
▶ How Do Vodafones Valuation Metrics Look?   [Dec-22-16 10:37AM  at Market Realist]
▶ Is AT&T Inc. (T) Going to Burn These Hedge Funds?   [Nov-29-16 02:33AM  at Insider Monkey]
▶ Is General Electric Company (GE) a Good Stock to Buy?   [Nov-27-16 08:19PM  at Insider Monkey]
▶ What THIS Metric Says About Wells Fargo & Co (WFC)?   [Nov-23-16 01:22PM  at Insider Monkey]
▶ Is Facebook Inc (FB) a Good Stock to Invest In?   [11:22AM  at Insider Monkey]
▶ [$$] Vodafone Loss Widened by Hefty India Write-Down   [Nov-15-16 10:04AM  at The Wall Street Journal]
▶ Hong Kong Lifestyle Expo Underway in Dubai   [Nov-07-16 08:13AM  ACN Newswire]
▶ Value Partners Acquires High-Impact Holdings   [Sep-27-16 06:53PM  Gurufocus]
▶ How China matters to your 401(k)   [06:03AM  at MarketWatch]
▶ China Mobile Endures Downgrades (CHL, CBSH)   [Sep-22-16 08:04AM  at Investopedia]
▶ 3 Top Telecom Stocks You Can Buy Today   [Sep-15-16 02:22PM  at Motley Fool]
▶ Why We Are Bullish On China Mobile   [Sep-06-16 08:38AM  at Forbes]
▶ How China Matters to Your 401(k)   [12:08AM  at The Wall Street Journal]
▶ How China Matters to Your 401(k)   [Sep-05-16 10:32PM  at The Wall Street Journal]
▶ CHNCX, FLFAX, MALTX: Funds to Avoid With a Strong Dollar   [Aug-18-16 04:23PM  at Investopedia]
▶ China Unicom: Do We See First Signs Of Recovery?   [Aug-17-16 10:24PM  at Barrons.com]
▶ Asia Markets Mixed; Futures Point to Positive Opening   [Aug-11-16 03:43AM  at TheStreet]
Stock chart of CHL Financial statements of CHL Annual reports of CHL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.