Credit Suisse Reiterates on China Mobile Limited, Says Payout Ratio is Crucial

In a report published Monday, Credit Suisse analyst Collin McCallum maintained an Outperform rating on China Mobile Limited

. According to the report, “The introduction of an asymmetrical interconnect regime, under which China Mobile will pay Rmb0.06/min but receive only Rmb0.04/min will lower our FY14E EBITDA by circa Rmb9.0 bn. We have also revised up our total FY14 handset subsidy forecast by Rm5.3 bn following China Mobile's agreement with Apple to sell the iPhone from 17 January 2014.” Some highlights from the report included: -”Given the extent of the FY14E earnings decline now expected, we believe a change in the payout ratio (to circa 49.0% from 43.0%) is crucial to maintain the dividend in absolute terms and support the share price.” -”While the potential for a change in interconnect rates was first mentioned in press articles in October, the Ministry of Industry and Information Technology (MIIT) on 23 December 2013 confirmed that interconnection rates in China will be amended as of 1 January 2014.” -”Following the two announcements we cut our FY14 EBITDA forecast by Rmb14.2 bn, or 5.5%. This in turn feeds through to a 9.1% reduction in our FY14 net profit forecast.” CHL closed Friday at $52.00 with shares down at 1.44%.