Comba poised to profit from huge investment in mobiles

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					                                                                                                                           S U N D A Y , J U N E 19 , 2 0 0 5                                                                                                                      15

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                                                                                            China market has a penetration rate of only 26 per cent, says Andy Mantel

                                                                                       Comba poised to profit from
                                                                                       huge investment in mobiles
                                                                                  There can be few better examples       phones. In between is the wireless                                                                                       $255 million, annual increases of 36
                                                                                  of a growing market than China’s       coverage equipment – and that is                                        MANTEL’S CHOICE                                  per cent and 21 per cent respec-
                                                                                  mobile phone industry. With a          where Comba comes in.                                                                                                    tively.
Paul Clitheroe is a best-selling author on managing money. Photo: SMP             mere 25.9 per cent penetration            Products such as amplifiers, an-                                                         Price on   Friday                About 74 per cent of the com-
                                                                                  rate, the total subscriber base has    tennas and receivers extend cover-                                                      recommendation price             pany’s turnover was derived from

 It isn’t rocket science                                                          already swollen to 354 million users
                                                                                  – the world’s largest market.
                                                                                      In the first four months of this
                                                                                  year alone, those phones ran up
                                                                                                                         age in outdoor areas and eliminate
                                                                                                                         blind spots indoors. Comba is
                                                                                                                         China’s leading coverage equip-
                                                                                                                         ment vendor, with more than 25
                                                                                                                                                                                                  Jan 1
                                                                                                                                                                                                  (Nasdaq short)
                                                                                                                                                                                                                     US$51.97    US$13.229
                                                                                                                                                                                                                                                  indoor products, 16 per cent from
                                                                                                                                                                                                                                                  outdoor products and 4.8 per cent
                                                                                                                                                                                                                                                  from PHS. From 2001to 2004, Com-
                                                                                                                                                                                                                                                  ba had turnover of 36 per cent and
   but don’t confuse                                                              378 billion minutes in user time.
                                                                                      To support growth on this scale,
                                                                                  China Mobile has budgeted 65 bil-
                                                                                                                         per cent market share.
                                                                                                                            It is believed the Chinese gov-
                                                                                                                         ernment will issue three 3G licen-
                                                                                                                                                                                                  (Nasdaq short)
                                                                                                                                                                                                                     US$18.65    US$12.19         net profit of 28 per cent.
                                                                                                                                                                                                                                                      There was strong growth from
                                                                                                                                                                                                                                                  indoor-technology sales and ex-

 saving with investing                                                            lion yuan for capital expenditure
                                                                                  this year, while China Unicom
                                                                                  plans to spend 18 billion yuan.
                                                                                                                         ces by the end of this year or next
                                                                                                                         year. The good news is that Comba
                                                                                                                         has a product stream compatible
                                                                                                                                                                                                  March 18
                                                                                                                                                                                                  The9Ltd            US$16.86    US$25.65
                                                                                                                                                                                                                                                  ports, but gross margin dropped to
                                                                                                                                                                                                                                                  43 per cent from 46 per cent year on
                                                                                                                                                                                                                                                  year, due largely to competitive un-
                                                                                      Who is going to benefit from the   with the three popular technology                                        (Nasdaq short)                                  dercutting.
                                          consider the average is not enough.     investment bonanza? My money is        standards used in the new multi-                                                                                             Comba intends to expand its
MEET THE                                  This often happens when they            on Comba Telecom, which pro-           media        networks         WCDMA,                                     May 6                                           customer base so as to win future
MANAGER                                   chase the “next best thing”, choos-     vides innovative technology to help    CDMA2000 and TD-SCDMA.                                                   Petrochina         $4.75       $5.35            contracts and management ex-
CHRIS DAVIS                               ing speculative investment options
                                          that are high risk, or get caught by
                                                                                  operators build reliable network
                                                                                  coverage at lower cost.
                                                                                                                         Thanks to Comba, telecom opera-
                                                                                                                         tors will find it relatively easy to up-                                 June 17
                                                                                                                                                                                                                                                  pects gross margins to stabilise at
                                                                                                                                                                                                                                                  around 40 per cent.
                                          investment scams.                           More specifically, its antennas,   grade to 3G.                                                             Comba Telecom $3.25            $3.25                The company is keen to diver-
Australia’s leading media com-               Another failing is the tempta-       amplifiers and receivers enable           The company also diversified                                                                                          sify its product mix and further
mentator on financial issues could tion to time equity markets. Mr                operators to avoid building costly     last year into the PHS market oper-                                                                                      boost export sales to 10 per cent of
easily afford to retire to his elegant Clitheroe believes success depends         base stations.                         ated by China Telecom and China                                                 Comba Telecom’s major customers          gross sales this year.
Sydney home and luxury yacht.             on time in the market, with assets          Apart from China Mobile and        Netcom. Although PHS provides                 SMP Graphic                       are China Mobile and China Unicom            It is trading at 9.6 times estimat-
    But 49-year-old Paul Clitheroe, invested over a period.                       China Unicom – its two major cus-      only limited mobile services, the                                                                                        ed earnings with a 2.6 per cent divi-
whose books on making money                  The Australian government has        tomers – Comba is expanding its        development of some PHS prod-                                                                                            dend yield, a return on equity of
have sold more than 600,000 copies appointed Mr Clitheroe as chair-               international customer base with       ucts has helped Comba to establish         search and development of digital     services after the warranty period      about 23 per cent, and a debt-to-
– a rare achievement for an Austra- man of the Consumer and Finan-                sales offices in Hong Kong, Singa-     relationships with those fixed-line        microwave systems, a technology       expires. This provides steady and       equity ratio of 14 per cent.
lian non-fiction author, carries on cial Literacy Taskforce, which will           pore, Thailand and Sweden.             operators which are potential can-         that complements Comba’s line of      recurring income to Comba as its            It is estimated that its annual
working, dispensing the same set a national strategy to improve                       China’s wireless equipment         didates for the 3G licences.               antennae and repeaters.               customer base grows larger.             growth rate for the next three years
financial advice that he follows the financial skills of all Australians.         market can be categorised in three        Comba has also been active in              Digital microwave systems are a       Although the wireless coverage       will be 20 per cent.
himself.                                     His no-hype approach to invest-      sectors. The core network equip-       the search for high-growth busi-           potential growth driver, as large     equipment market has competi-
    “Investing and, more impor- ing and wealth management fo-                     ment providers include Huawei          nesses that marry well with its stra-      enterprises such as oil and power     tors like WRI and Powercom, Com-        Andy Mantel is managing director
tantly, making money is not as hard cuses on getting rich slowly, al-             Technologies and ZTE, who build        tegic focus.                               companies are using microwave         ba maintains leadership with com-       of Pacific Sun Investment Manage-
as most people might think,” says though his personal wealth was                  base stations and make routers and        For example, last year it in-           technology to build internal net-     plete provision of equipment and        ment and manager of The China
Mr Clitheroe, chairman of Austra- given a hefty boost when AXA Asia               switches. The consumer equip-          creased its equity interest in US-         works to save costs.                  services.                               Mantou Fund. The fund is available
lian Money magazine, co-founder Pacific paid A$205 million ($1.21                 ment providers including Nokia         based WaveLab Holdings to 60 per              For current customers, Comba          Last year turnover reached           to accredited professional investors
and director of financial advice billion) (including $183 million to              and Motorola produce mobile            cent. WaveLab is engaged in the re-        provides extended maintenance         $1.093 billion and net profit rose to   only.
firm ipac, syndicated newspaper shareholders plus a $22 million
columnist and radio commentator. capital injection into the company)
    He says investors don’t have to for ipac in 2002.
be rocket scientists to make money           He recommends investing in
from investing. “To succeed they quality companies, such as those
need to understand the investment with a fundamental basis behind
facts and learn how to take control their prospective earnings. New
of their investments.”                    companies that focus on a particu-
    This is a discipline that many in- lar market segment such as health
vestors often                                                 care could also
overlook. For                                                 be of interest,
example, identi-    “The key to                               providing the
fying the differ-                                             investment
ence between         investing is not to                      does not create
saving and in-                                                excessive risk in
vesting is a com-    avoid risk but                           an overall port-
mon cause of         sensibly manage it”                      folio.
confusion. He                                                     Quoting the
says        saving                           Paul Clitheroe old maxim that
means putting                      Investment commentator if the invest-
money aside to                                                ment sounds
cover       short-                                            too good to be
term goals such as holidays. This true it probably is, Mr Clitheroe
money should be kept secure and says an element of risk should
accessible. However, in exchange always be considered. “The key to
for security returns are usually low. successful investing is not to avoid
    Investing is about accumulating risk but sensibly manage risk. For
money over the long term to pro- example, diversifying investments
vide financial security. This has the across non-correlating investment
potential to generate bigger re- tools such as cash, bonds, property
wards but may be exposed to the and equities.” The same diversifi-
ups and downs of markets.                 cation concept should apply within
    “It is amazing that in so many each investment sector.
instances the better educated the            As for the best stock-buying op-
investor or the more money they portunities, Mr Clitheroe says from
earn the more ridiculous their ap- time to time there are episodes of
proach to investing or saving seems genuine panic selling.
to be,” Mr Clitheroe says. Fre-              “When an over-priced company
quently executives who are suc- falls a lot, it is a correction,” he said.
cessful in their own businesses fail “Panic is when sellers do not distin-
miserably when it comes to manag- guish between good-quality com-
ing their own investments.                panies and poor-quality compa-
    Often high-income earners do nies but just want to get cash.
not have a long-term plan and in-            “Over the last 30 years there
vest the same amount or less than have been 15 to 20 days of genuine
people on significantly lower in- panic. These provide opportunities
comes. They are also tempted to to buy a good-quality company at
chase high returns because they the same price as a bad company.”

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14,200                                   10,800
13,400                                   10,200
13,200                                   10,000
         Apr 17              Jun 17               Apr 17              Jun 17
 SMP Graphic        Source: Bloomberg     SMP Graphic        Source: Bloomberg

Hong Kong stocks are expected to         This week investors tackle the
be range-bound this week with            question of how long stocks can
impetus provided by China-linked         rise in the face of record high oil
initial public offerings, oil prices     prices. Commodity-related shares
and telecom markers, analysts say.       pushed up the major stock indexes
    “Frankly it could be boring but      last week as crude gained four
things are looking more on the           days out of five and closed above
upside because liquidity is moving       $58 on Friday.
from one sector to another, with             “We’ve had a pretty big run in
telecoms appearing the biggest           oil prices and it hasn’t seemed to
gainers,” says Conita Hung, head         have any impact,” said Alfred
of research at Delta Asia Financial      Kugel, chief investment officer at
Group. “Telecoms will be the             Atlantic Trust/Stein Roe.
driver, especially the China-related         For the week the Dow rose 1.05
telecom stocks.”                         per cent to 10,623.07, the S&P
    For the week the Hang Seng           gained 1.57 per cent to 1,216.96,
Index fell 22.73 points, or 0.16 per     and Nasdaq was up 1.31 per cent
cent, to 13,912.03. AFP                  to 2,090.11. Reuters

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