Fina321 Hsi Valuation Report

Synergy Investment Asia Pacific Equity Research

1 April 2011

Stock Recommendation

Most Undervalued:

China Mobile Limited (941.HK)

Most Overvalued:

Foxconn International Holdings (2038.HK)

China Mobile Limited (941.HK)

Key Drivers

* CM holds the licenses to operate nationwide 2G GSM and 3G TD-SCDMA services.

* TD-LTE, a viable secondary 4G standard, and develop the industry chain was actively promoted by CM

* Its value-added services business grew rapidly, with Wireless Music, Mobile Paper, “Fetion” and Mobile Mailbox all enjoying significant increases in revenue, and Mobile Gaming, Mobile Payment, Mobile Reading and Mobile Video enjoying rapid expansions in their customer bases.

* CM made further progress in mobile Internet and “Internet of Things”, actively expanding into new areas and exploring new business models.

Foxconn International Holdings (2038.HK)

Main Risks

* Inefficient management which lacks clear strategic direction and implementation ability

* Lack of group potential due to in sourcing trend for featured phones and limited outsourcing for smartphones

* Weak gross margin with increasing production costs and decreasing prices

* Earning swung from positive to negative

ANALYSTS (Group 7 L1)

CHAN, Man Chung im_cmcae@stu.ust.hk | KAN, Benjamin Yiu Chung bm_kby@stu.ust.hk |

CHAU, Kai Hang ac_ckhaj@stu.ust.hk | LAM, Cheuk Him Hamish qf_lch@stu.ust.hk |

HUANG, Lee Leeqf_hll@stu.ust.hk | LEE, Man Ki mkleeaa@stu.ust.hk |

ABSTRACT

We recommend China Mobile Limited (941.HK) as the most undervalued HSI constituent and Foxconn International Holdings (2038.HK) as the most overvalued HSI constituent. Apart from in-house matrix analysis, we also added two innovative methods to value stocks—(1) rebased earning and compare with the price performance in last 5 years; (2) conduct a scenario analysis to predict the correct PE.

China Mobile Limited (941.HK)

Substantially...