Comba issued guidance on February 24 that its 2009 net income would grow by over 100% when compared with that of HK$227.5 million in the corresponding period in 2008, 2% higher than our projections. Comba cited strong growth in 2H 2009, composed of the strong surge in the demand for mobile network communications equipment following the completion of the restructuring of telecommunication industry in China. The positive profit alert to our forecast likely stemmed from stronger top-line momentum fueled by a rapid market share gains from the network build-outs and enhancement projects of mobile network facilities undertaken by the three mobile carriers. Given ongoing market share gains to offset slower Chinese telco capex in 2010F, we reiterated our BUY rating with 12 months TP of HK$12.60 against 16.3x forward PE for 2011F.

Profit growth beyond double digits in 2010/11F. We maintain our earnings forecast for 2010 and believe Comba’s market share expansion and downward trend in operating expenses will persist beyond 2009. Our investment theme rests on Comba’s earnings potential derived from 2G/3G enhancement in both China and emerging markets. We maintain our view that Comba’s 2010F bottom line is likely to grow beyond double digits (+41% YoY) thanks to margin recovery and contained SG&A expenses. In addition, we also factor in our model the positive impact of better overseas growth and higher market share.

Strengthening foothold in emerging markets. After building a strong position in the domestic market, Comba’s positions abroad have also been strengthened by recent wins in the emerging markets. These regions would be the next engine of growth over the next 2- 3 years, and share gain in theses regions set the platform for Comba’s global growth. We forecast Comba’s 2010 figures will show 30% growth from the overseas markets.

We recommend BUY on Comba with 12 months TP of HK$12.60. Comba is trading at 19.5x 2009F, reflecting its robust market share expansion and earnings growth. We believe that the 3G telecommunication networks expansion as well as the major improvement of the current 2G and 3G to provide coverage in China and emerging markets would be the key growth drive for the company over the next 2-3 years. We reiterated our overweight rating with 12-month target price of HK$12.60 against 16.3x forward PE for 2011F.