With the issuance of 3G licences, mobile devices will become an investment focus. Lead by China Unicom Corp. the communications sector will bounce back.

Investment highlights: net profit in the first half of 2008 is estimated to increase by 10%-30% YOY, in which it was originally estimated to increase by 50%-100%. In the second quarter of 2008, the company will be focusing on a security programme for mobile usage during the Beijing Olympics which will affect certain other system programmes.

The company holds independent intellectual property rights for all of its products including its internally-developed UMTS/TD-SCDMA 3G network comprehensive test security platform. Fifty-eight percent of the company's products have filled product voids in the domestic market.

According to statistics of IDC, the market scale for communication network test products in China from 2004 to 2008 is RMB 2.95 bln with a 11% expected compound growth rate from 2005 to 2008. It is expected that the company's revenue in the next three years will exceed its total revenue in the last ten years.

Risk warning: Although major customers of the company such as China Mobile Ltd. and China Unicom Corp. have good credit ratings and have no problems in their accounts receivable, it is still possible for the company to write-down certain depreciations.

Source: www.topcj.com

Date: 24 Jun 2008

CN01/MZ/KM