Intrinsic value of China Mobile ADR - CHL

Previous Close

$55.36

  Intrinsic Value

$66.35

stock screener

  Rating & Target

hold

+20%

  Value-price divergence*

+751%

Previous close

$55.36

 
Intrinsic value

$66.35

 
Up/down potential

+20%

 
Rating

hold

 
Value-price divergence*

+751%

*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 223.6

 

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
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  102,489
  108,638
  115,048
  121,732
  128,706
  135,986
  143,588
  151,531
  159,832
  168,512
  177,590
  187,089
  197,031
  207,439
  218,338
  229,754
  241,715
  254,249
  267,385
  281,156
  295,593
  310,732
  326,609
  343,261
  360,728
  379,052
  398,277
  418,448
  439,614
  461,825
  485,133
Variable operating expenses, $m
 
  67,542
  71,497
  75,621
  79,925
  84,416
  89,107
  94,008
  99,130
  104,485
  110,086
  115,436
  121,570
  127,992
  134,717
  141,761
  149,141
  156,874
  164,980
  173,476
  182,384
  191,725
  201,521
  211,796
  222,573
  233,879
  245,741
  258,187
  271,247
  284,951
  299,333
Fixed operating expenses, $m
 
  22,802
  23,372
  23,957
  24,555
  25,169
  25,799
  26,444
  27,105
  27,782
  28,477
  29,189
  29,918
  30,666
  31,433
  32,219
  33,024
  33,850
  34,696
  35,564
  36,453
  37,364
  38,298
  39,256
  40,237
  41,243
  42,274
  43,331
  44,414
  45,524
  46,662
Total operating expenses, $m
  85,405
  90,344
  94,869
  99,578
  104,480
  109,585
  114,906
  120,452
  126,235
  132,267
  138,563
  144,625
  151,488
  158,658
  166,150
  173,980
  182,165
  190,724
  199,676
  209,040
  218,837
  229,089
  239,819
  251,052
  262,810
  275,122
  288,015
  301,518
  315,661
  330,475
  345,995
Operating income, $m
  17,084
  18,294
  20,179
  22,154
  24,226
  26,401
  28,683
  31,080
  33,598
  36,245
  39,027
  42,464
  45,542
  48,780
  52,188
  55,774
  59,550
  63,524
  67,709
  72,116
  76,756
  81,643
  86,789
  92,210
  97,918
  103,930
  110,262
  116,930
  123,953
  131,349
  139,138
EBITDA, $m
  37,134
  29,452
  31,965
  34,595
  37,351
  40,238
  43,266
  46,441
  49,773
  53,270
  56,942
  60,799
  64,851
  69,109
  73,585
  78,290
  83,238
  88,441
  93,913
  99,669
  105,724
  112,095
  118,797
  125,849
  133,269
  141,077
  149,293
  157,938
  167,035
  176,608
  186,681
Interest expense (income), $m
  34
  0
  220
  449
  687
  936
  1,195
  1,466
  1,749
  2,045
  2,354
  2,678
  3,016
  3,371
  3,742
  4,130
  4,537
  4,963
  5,410
  5,878
  6,369
  6,883
  7,423
  7,989
  8,582
  9,204
  9,858
  10,543
  11,262
  12,016
  12,807
Earnings before tax, $m
  20,900
  18,294
  19,958
  21,705
  23,539
  25,465
  27,488
  29,614
  31,849
  34,200
  36,673
  39,787
  42,526
  45,410
  48,446
  51,644
  55,013
  58,561
  62,300
  66,238
  70,388
  74,760
  79,367
  84,221
  89,336
  94,725
  100,404
  106,388
  112,692
  119,333
  126,331
Tax expense, $m
  5,154
  4,939
  5,389
  5,860
  6,356
  6,876
  7,422
  7,996
  8,599
  9,234
  9,902
  10,742
  11,482
  12,261
  13,081
  13,944
  14,854
  15,812
  16,821
  17,884
  19,005
  20,185
  21,429
  22,740
  24,121
  25,576
  27,109
  28,725
  30,427
  32,220
  34,109
Net income, $m
  15,732
  13,354
  14,569
  15,845
  17,184
  18,589
  20,066
  21,618
  23,250
  24,966
  26,771
  29,044
  31,044
  33,149
  35,366
  37,700
  40,159
  42,750
  45,479
  48,354
  51,383
  54,575
  57,938
  61,481
  65,215
  69,150
  73,295
  77,663
  82,265
  87,113
  92,222

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
  163,121
  172,745
  182,781
  193,253
  204,183
  215,598
  227,524
  239,988
  253,021
  266,652
  280,914
  295,842
  311,469
  327,834
  344,976
  362,935
  381,755
  401,479
  422,156
  443,834
  466,565
  490,404
  515,407
  541,634
  569,148
  598,014
  628,301
  660,081
  693,430
  728,429
Adjusted assets (=assets-cash), $m
  153,842
  163,121
  172,745
  182,781
  193,253
  204,183
  215,598
  227,524
  239,988
  253,021
  266,652
  280,914
  295,842
  311,469
  327,834
  344,976
  362,935
  381,755
  401,479
  422,156
  443,834
  466,565
  490,404
  515,407
  541,634
  569,148
  598,014
  628,301
  660,081
  693,430
  728,429
Revenue / Adjusted assets
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
  0.666
Average production assets, $m
  100,426
  106,466
  112,747
  119,298
  126,132
  133,266
  140,717
  148,500
  156,636
  165,142
  174,038
  183,347
  193,090
  203,290
  213,971
  225,159
  236,881
  249,164
  262,037
  275,532
  289,681
  304,518
  320,077
  336,396
  353,514
  371,471
  390,311
  410,079
  430,822
  452,588
  475,431
Working capital, $m
  7,270
  -10,864
  -11,505
  -12,173
  -12,871
  -13,599
  -14,359
  -15,153
  -15,983
  -16,851
  -17,759
  -18,709
  -19,703
  -20,744
  -21,834
  -22,975
  -24,171
  -25,425
  -26,738
  -28,116
  -29,559
  -31,073
  -32,661
  -34,326
  -36,073
  -37,905
  -39,828
  -41,845
  -43,961
  -46,182
  -48,513
Total debt, $m
  723
  4,691
  9,551
  14,620
  19,908
  25,428
  31,192
  37,215
  43,509
  50,090
  56,974
  64,177
  71,715
  79,607
  87,871
  96,528
  105,597
  115,101
  125,062
  135,504
  146,451
  157,930
  169,969
  182,595
  195,840
  209,735
  224,312
  239,607
  255,656
  272,497
  290,171
Total liabilities, $m
  78,408
  82,376
  87,236
  92,305
  97,593
  103,113
  108,877
  114,900
  121,194
  127,775
  134,659
  141,862
  149,400
  157,292
  165,556
  174,213
  183,282
  192,786
  202,747
  213,189
  224,136
  235,615
  247,654
  260,280
  273,525
  287,420
  301,997
  317,292
  333,341
  350,182
  367,856
Total equity, $m
  141,637
  80,745
  85,509
  90,477
  95,660
  101,071
  106,721
  112,624
  118,794
  125,245
  131,993
  139,053
  146,442
  154,177
  162,278
  170,763
  179,653
  188,969
  198,732
  208,967
  219,698
  230,950
  242,750
  255,126
  268,109
  281,728
  296,017
  311,009
  326,740
  343,248
  360,572
Total liabilities and equity, $m
  220,045
  163,121
  172,745
  182,782
  193,253
  204,184
  215,598
  227,524
  239,988
  253,020
  266,652
  280,915
  295,842
  311,469
  327,834
  344,976
  362,935
  381,755
  401,479
  422,156
  443,834
  466,565
  490,404
  515,406
  541,634
  569,148
  598,014
  628,301
  660,081
  693,430
  728,428
Debt-to-equity ratio
  0.005
  0.060
  0.110
  0.160
  0.210
  0.250
  0.290
  0.330
  0.370
  0.400
  0.430
  0.460
  0.490
  0.520
  0.540
  0.570
  0.590
  0.610
  0.630
  0.650
  0.670
  0.680
  0.700
  0.720
  0.730
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
Adjusted equity ratio
  0.490
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15,732
  13,354
  14,569
  15,845
  17,184
  18,589
  20,066
  21,618
  23,250
  24,966
  26,771
  29,044
  31,044
  33,149
  35,366
  37,700
  40,159
  42,750
  45,479
  48,354
  51,383
  54,575
  57,938
  61,481
  65,215
  69,150
  73,295
  77,663
  82,265
  87,113
  92,222
Depreciation, amort., depletion, $m
  20,050
  11,158
  11,786
  12,441
  13,125
  13,838
  14,583
  15,361
  16,175
  17,025
  17,915
  18,335
  19,309
  20,329
  21,397
  22,516
  23,688
  24,916
  26,204
  27,553
  28,968
  30,452
  32,008
  33,640
  35,351
  37,147
  39,031
  41,008
  43,082
  45,259
  47,543
Funds from operations, $m
  34,308
  24,512
  26,355
  28,286
  30,308
  32,427
  34,649
  36,979
  39,425
  41,991
  44,686
  47,379
  50,353
  53,478
  56,763
  60,216
  63,848
  67,666
  71,682
  75,907
  80,351
  85,026
  89,945
  95,121
  100,567
  106,297
  112,326
  118,671
  125,347
  132,372
  139,765
Change in working capital, $m
  -2,395
  -615
  -641
  -668
  -697
  -728
  -760
  -794
  -830
  -868
  -908
  -950
  -994
  -1,041
  -1,090
  -1,142
  -1,196
  -1,253
  -1,314
  -1,377
  -1,444
  -1,514
  -1,588
  -1,665
  -1,747
  -1,832
  -1,922
  -2,017
  -2,117
  -2,221
  -2,331
Cash from operations, $m
  36,703
  25,127
  26,996
  28,954
  31,006
  33,155
  35,409
  37,774
  40,255
  42,859
  45,594
  48,329
  51,347
  54,519
  57,853
  61,358
  65,044
  68,920
  72,996
  77,284
  81,795
  86,540
  91,533
  96,786
  102,313
  108,129
  114,249
  120,688
  127,464
  134,593
  142,095
Maintenance CAPEX, $m
  0
  -10,043
  -10,647
  -11,275
  -11,930
  -12,613
  -13,327
  -14,072
  -14,850
  -15,664
  -16,514
  -17,404
  -18,335
  -19,309
  -20,329
  -21,397
  -22,516
  -23,688
  -24,916
  -26,204
  -27,553
  -28,968
  -30,452
  -32,008
  -33,640
  -35,351
  -37,147
  -39,031
  -41,008
  -43,082
  -45,259
New CAPEX, $m
  -27,598
  -6,040
  -6,281
  -6,551
  -6,835
  -7,134
  -7,450
  -7,784
  -8,135
  -8,506
  -8,897
  -9,309
  -9,743
  -10,200
  -10,681
  -11,188
  -11,722
  -12,283
  -12,874
  -13,495
  -14,149
  -14,836
  -15,559
  -16,319
  -17,118
  -17,958
  -18,840
  -19,768
  -20,742
  -21,767
  -22,843
Cash from investing activities, $m
  -28,142
  -16,083
  -16,928
  -17,826
  -18,765
  -19,747
  -20,777
  -21,856
  -22,985
  -24,170
  -25,411
  -26,713
  -28,078
  -29,509
  -31,010
  -32,585
  -34,238
  -35,971
  -37,790
  -39,699
  -41,702
  -43,804
  -46,011
  -48,327
  -50,758
  -53,309
  -55,987
  -58,799
  -61,750
  -64,849
  -68,102
Free cash flow, $m
  8,561
  9,045
  10,068
  11,129
  12,241
  13,408
  14,632
  15,918
  17,269
  18,690
  20,183
  21,616
  23,270
  25,010
  26,843
  28,773
  30,806
  32,948
  35,206
  37,585
  40,093
  42,736
  45,522
  48,459
  51,556
  54,820
  58,261
  61,889
  65,713
  69,745
  73,994
Issuance/(repayment) of debt, $m
  -249
  4,691
  4,860
  5,068
  5,288
  5,520
  5,764
  6,022
  6,295
  6,581
  6,884
  7,202
  7,538
  7,892
  8,264
  8,657
  9,069
  9,504
  9,961
  10,442
  10,947
  11,479
  12,039
  12,627
  13,245
  13,894
  14,577
  15,295
  16,049
  16,841
  17,674
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
  4,691
  4,860
  5,068
  5,288
  5,520
  5,764
  6,022
  6,295
  6,581
  6,884
  7,202
  7,538
  7,892
  8,264
  8,657
  9,069
  9,504
  9,961
  10,442
  10,947
  11,479
  12,039
  12,627
  13,245
  13,894
  14,577
  15,295
  16,049
  16,841
  17,674
Total cash flow (excl. dividends), $m
  8,327
  13,736
  14,929
  16,198
  17,529
  18,928
  20,397
  21,941
  23,564
  25,271
  27,067
  28,819
  30,808
  32,902
  35,107
  37,429
  39,876
  42,452
  45,167
  48,027
  51,040
  54,215
  57,561
  61,086
  64,801
  68,715
  72,839
  77,184
  81,762
  86,586
  91,668
Retained Cash Flow (-), $m
  -8,924
  -4,588
  -4,764
  -4,968
  -5,183
  -5,411
  -5,650
  -5,903
  -6,170
  -6,451
  -6,747
  -7,060
  -7,389
  -7,736
  -8,101
  -8,485
  -8,890
  -9,316
  -9,764
  -10,235
  -10,731
  -11,252
  -11,800
  -12,377
  -12,982
  -13,619
  -14,289
  -14,992
  -15,731
  -16,508
  -17,324
Prev. year cash balance distribution, $m
 
  65,480
  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
 
  74,628
  10,165
  11,229
  12,346
  13,517
  14,747
  16,038
  17,394
  18,820
  20,319
  21,759
  23,419
  25,166
  27,006
  28,944
  30,986
  33,137
  35,403
  37,792
  40,310
  42,963
  45,761
  48,709
  51,818
  55,095
  58,550
  62,192
  66,031
  70,078
  74,344
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
 
  71,552
  9,305
  9,773
  10,166
  10,477
  10,702
  10,835
  10,872
  10,811
  10,653
  10,333
  9,994
  9,569
  9,066
  8,498
  7,874
  7,210
  6,520
  5,819
  5,122
  4,444
  3,797
  3,192
  2,639
  2,143
  1,708
  1,335
  1,022
  765
  560
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 72.1
Price to Sales 11.1
Price to Book 8
Price to Tangible Book
Price to Cash Flow 30.9
Price to Free Cash Flow 124.5
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 $102489 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 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 62.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $22246 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 4.7% 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 98%.

Life of production assets of 10 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 -10%. 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 - $141637 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 $223.6 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

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▶ ETFs with exposure to China Mobile Ltd. : April 19, 2017   [Apr-19-17 02:15PM  Capital Cube]
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▶ 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]
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▶ 10 Reasons to Buy China Mobile Ltd. and Never Sell   [Mar-19-17 12:35PM  Motley Fool]
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▶ [$$] Apple, Samsung Need to Dazzle in a Slow Market   [Feb-24-17 02:29PM  at The Wall Street Journal]
▶ 10 Most Valuable Brands in China   [Jan-27-17 01:17PM  at Insider Monkey]
▶ [$$] China Mobile Can Dial Up 25% Upside   [Jan-26-17 08:41PM  at Barrons.com]
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▶ How China matters to your 401(k)   [06:03AM  at MarketWatch]
▶ China Mobile Endures Downgrades (CHL, CBSH)   [Sep-22-16 08:04AM  at Investopedia]
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▶ Why We Are Bullish On China Mobile   [Sep-06-16 08:38AM  at Forbes]
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▶ 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]
Stock chart of CHL Financial statements 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.

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