The biggest telecom operator in the world by subscribers, which was forced off the New York Stock Exchange last May, is raising as much as 56 billion yuan.
While still listed in Hong Kong, it lost its place on the NYSE after being placed on an investment blacklist by the White House due to alleged military links, which have been denied by the operator.
If China Mobile fully utilises an option to upsize the share sale, this would make it the largest debut on the domestic market since Agricultural Bank of China raised 68.5 billion yuan in 2010.
Rival China Telecom sold 47.9 billion yuan in new shares last August when it listed in Shanghai after also being ejected from the NYSE.
China Telecom closed up 34.9% on its debut, after briefly gaining the maximum 44% allowed on the first day. It has largely traded below its IPO price since then.
China Mobile appears to be aiming to top its rival’s performance.
At 57.58 yuan, China Mobile’s share sale price represents a multiple of 12 times the company’s proportional 2020 profits and an even smaller multiple of the 114.3 million yuan to 116.46 million yuan in net profit it has signalled it expects to report for 2021.
China Telecom priced its offering at more than 20 times its year-earlier profits.
In addition, China Mobile’s newly issued stock will represent no more than 4.5% of its overall share base once the sale is complete, as compared with 11% for China Telecom.
China Mobile received orders for more than 800 times the shares offered in its sale, as compared with a multiple of 180 for China Telecom.
Moreover, nearly half of China Mobile’s new shares have been allotted to 19 strategic investors who will be barred from trimming their stakes for one to three years.
The group is mostly composed of state-owned enterprises, including China Life Insurance and a unit of China Energy Investment Corp, as well as the Brunei Investment Agency and Chia Tai Investment, a subsidiary of Thai tycoon Dhanin Chearavanont’s CP Group.
China Mobile will take the spotlight as the only debut this week in Shanghai or Shenzhen allowed by regulators.
The fledgling Beijing Stock Exchange will see one small listing.
Stephen Leung, an analyst at Crosby Securities in Hong Kong, rates China Mobile as a “buy”, highlighting the potential for still more generous dividend payments in the future.
He noted in a recent report that the company has been generating over 100 billion yuan in free cash flow a year and expects to continue to do so for the next few years.
“The rich cash resources also pose upside risk to payout,” he said, adding,
“The A-share issue is more for returning to the homeland than raising cash.”
China Mobile is one of the most cash-rich Chinese companies around, recording 274.14 billion yuan of cash and equivalents as of June 30.
Recent listing rule changes paved the path to Shanghai for China Mobile which as a “red chip” company incorporated outside the mainland previously faced obstacles.
Beijing has been keen to bring home major Chinese companies even as Washington has made them less welcome on US markets amid bilateral tensions.
China Mobile made only a brief mention of its US delisting in its 473-page Shanghai prospectus.
Chairman Yang Jie told reporters and analysts earlier that the purpose of the offering is to “share the profit of growth with our wide range of users and to harmonize the profits of investors and consumers”.
Most of the company’s 956.78 million mobile subscribers are in China.