JP Morgan maintains its "Neutral" rating for Hong Kong Henderson Land Development.

JP Morgan recently released an analysis report stating that it will maintain its "Neutral" rating on the stock of Hong Kong Henderson Land Development Co., Ltd. (00012.) with a target price of HKD 35.00 due to its mediocre performance in 2007. Meanwhile it has lowered the core earnings of Henderson in the 2009 fiscal year by 17.8% to HKD 5.5 bln.

According to the report, gross profit of Henderson in 1H 2008 dropped by 3% to HKD 5.7 bln, lower than the bank's projected 4% decrease, excluding the 15% increase in the core earnings of certain special projects. It maintained a cash dividend of HKD 1.10 with a dividend payout ratio of 40% but only a 2.9% dividend yield.

JP Morgan states that Henderson has limited land reserves available for development in Hong Kong while its main projects in mainland China have been postponed and only scheduled to be completed in 2011, a year later than expected. The executive ability of Henderson and the negative sentiments of mainland developers will be investors' top concerns, which will cast a shadow on the Henderson's stock performance.

Citigroup downgrades China Communications Construction to a 'Moderate Sell' rating

Citigroup downgraded the ratings on the stock of China Communications Construction Co., Ltd. (01800.) from "Neutral" to "Moderate Sell" with the target price down from HKD 11.20 to HKD 6.00, indicating the company's sluggish performance in 1H 2008.

Citigroup states that due to domestic macroeconomic control and rising costs, net profit of the company decreased by 19.8% to HKD 2.2 bln, lower than the bank's projected HKD 2.6 bln. Citigroup had assumed that due to falling steel prices, the company's 2H performance will be slightly better than its 1H performance. However, the annual gross profit is still likely to decrease greatly YOY.

Citigroup also lowers the company's 2008 revenue growth rate from 28% to 24% and trims its 2009 revenue growth ratio to 18% from 25%. It warns that dragged down by the sluggish property market in mainland China, the company's accounts receivable may sky-rocket.

CLSA Limited downgrades China Mengniu Dairy Company Limited to a 'Moderate Sell' rating.

CLSA Limited cut the stock ratings of China Mengniu Dairy Company Limited (02319.) from 'Underweight' to 'Moderate Sell' with a target price down from HKD 18.85 to HKD 6.59, tenfold of the projected 2009 P/E ratio while the former target price is twenty-two times greater than the 2008 P/E ratio.

CLSA assumes that because of the notorious baby formula scandal, a new market order will be established in the dairy industry, thus stripping dairy producers of their powerful rights to set prices. Consequently, the gross profit of Mengniu Dairy will become cyclical and unpredictable, accordingly CLSA lowered the net profit of Mengniu Dairy for 2008 and 2009 respectively by 10.4% to HKD 1.042 bln and by 43.7% to HKD 825 mln, indicating a slowdown in dairy products and rising dairy costs.

Credit Suisse maintains China Life Insurance as 'Overweight'.

Credit Suisse recently disclosed its research report, which shows that China Life Insurance (02628) enjoyed RMB 225 bln unaudited insurance business revenue in the past eight months in 2008, a 57.2% increase over the same period last year or 94% higher than the August figure. In addition, the company's insurance revenue is projected to witness a 28.7% increase in 2008 by the bank, as a result, it reiterates its 'Overweight' rating on the China Life Insurance stock with a target of HKD 35.00.

Credit Suisse assumes that China Life Insurance enjoys a robust capital performance and a simplified business model, pushing its stock on to defensive grounds in the domestic market. The bank also projects a slowdown in the company's insurance business revenue due to the fact that the company will shift its attention to quality instead of quantity of insurance, however the bank also assumes that China Life Insurance will expand its business by raising funds from banks.


Source: China Securities Journal

Date: 22 Sept 2008

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