Comba Telecom(2342.HK).doc

Comba Telecom（2342.HK） Visible growth ahead BUY Price Target：HK$ 8.5 Upside：+32% Key Data Price(HK$) 6.46 Shares Outstanding 1525 Market Cap. (HK$ m) 9852 Free float (%) 64.3 52 Week Range 4.81/ 9.2 Controlling Shareholder Fok Tung Ling (35.67%) BVPS(HKD) 2.4 Asset-liability ratio (%) 12.1 Price Performance Chart Related Research： 《Electronics Sector：Comments on 12th Five-year plan on electronics segments》 July 15, 2011 《：》 Technology Telecom Analyst： SFC CE No.: AUT752 00852bill.fan@.hk Investment Highlights： Industry leader in China. Comba is a China-based telecom equipment vendor that focused in wireless enhancement, antenna, wireless access and related services. Comba domestic market share reached 28% and is capable to expand its overseas presence in emerging markets like Brazil. China Mobile is its largest single customer. Visible growth in wireless enhancement market. Comba has a good track record in both earnings growth (CAGR 53%)and FCF growth(CAGR 137%) in 2006-10. Increasing 3G penetration and explosive growth in mobile data traffic impose network pressure on operators. Capex will be inclined to spend on WLAN and optimization areas. Comba’s core products, like indoor coverage equipment and RRU, will continue to be its growth drivers. Crossing selling capability by providing one-stop-shop solution. Comba’s advantageous position is believed to be coming from its well integration of equipment sales and services, that create business synergies and enhances customer resources sharing. We initiate coverage with a BUY rating with target price of HK$ 8.5. Certain projects from China Telecom will start to contribute earnings in 2H. With accelerating CAPEX spending on network enhancement and WLAN equipments by China Mobile and Comba’s increasing economies of scale, we expect a de