STOCK RECOMMENDATION

SINOTEL TECHNOLOGIES LTD. (current price SGD 26.5 cents)

BACKGROUND

Sinotel is a wireless connectivity innovator company that provides a range of customised wireless telecommunication applications and solutions in China. Its main businesses are:
wireless network solutions, distribution solutions and mobile entertainment enabling solutions

MAJOR CUSTOMERS

China Unicom, China Mobile and China Netcom

KEY FINANCIAL DATA

Net profit ~ RMB 65.5 million (9m FY2007), surges 93.5% compared to 9m FY2006. It even exceeds full year 2006 profit (RMB 56.1 million).Overall gross profit margin ~ increased to 46.4% (was 37.3%)

EPS for 9m 2007 ~ RMB 23.7 cents (SGD .048). The EPS for 3rd quarter 2007 was RMB 9.7 cents. Assuming for the 4q of 2007, Sinotel can perform as good as last quarter 2006, which means the EPS for 4q2007 will be RMB 7.9 cents, the total EPS for 2007 will be RMB 31.6 cents (SGD . 064).

P/E for 9m 2007 ~ merely 5.5 x . Looking at the assumption above, FY2007 P/E will be just 4.1x.

Total post invitation shares ~ 280 million

Price ~ SGD 26.5 cents

IPO Price ~ SGD 51.0 cents (12 Nov 2007)

Results announcement for 3q2007 ~ 12 Dec 2007

52 Weeks price range ~ SGD . 210 (22 Jan 2008) - SGD.755 (14 Nov 2007)

Looking at the high growth of telecommunication industry in China, I believe Sinotel's business will enjoy the ride on China's booming mobile telecommunication industry even though there is still a risk that it might be affected by the slowing US economy.

We need to note that the launch of 3G networks (might be before olympic games) in China will create a new opportunities for SINOTEL as the telcom providers need to invest in the relevant 3G telecommunication networks, infrastructure and related services.

Last but not least, don't forget the coming olympic games 2008. Do you think Beijing want to lose their face when tourists visiting during the games will not be able to use their 3G handset? I don't think so!!!!

Fundamentally, SINOTEL's valuation is very attractive with a low P/E in such a high growth telecommunication industry in China. There is no way for me to do a technical analysis on SINOTEL at the moment as the price keep dropping since it was listed on 12 November 2007. There was no significant selling volume noted when the price dropped from SGD .42 to the lowest SGD .21.

STEADY BULL'S RECOMMENDATION: BUY WITH TP SGD .52 (FY2007 P/E 8X) ~ 96% UPSIDE POTENTIAL FROM THE CURRENT PRICE …HUAT ARH!!!!!!!!!!!!!!!