Time to put your cash into pager company
ABC Communications Recommendation: Buy Brokerage: Salomon Brothers ABC's subscriber base in Hong Kong will record annual growth of less than five per cent this year. Nearly 30 per cent of the company's customers now subscribe to value-added services, for example information dissemination, as opposed to 20 per cent in September 1994. There are more than 9,000 subscribers to roaming services in China.
As a result of lower growth at SmarTone and the accounting treatment of income from Vietnam paging operations, the brokerage has revised its earnings-per-share estimates for 1995 and 1996 down by around seven per cent to $0.27 and $0.36.
S. Megga Recommendation: Buy Brokerage: Salomon Brothers IN THE US market, revenues are on target to increase eight per cent for the year ending in June. Cordless telephones with answering machines now account for 20 per cent of sales and the company is also marketing 900 MHz telephones.
In Europe, the company maintains a seven to eight per cent profit margin. The customer base continues to increase with new accounts from Alcatel, Brondi and Doro among others.
S. Megga expects to begin production of European 1800 MHz personal communication network (PCN) handsets in April.
Due to China's long-term market potential and the expected strong sales of 1800 MHz PCN handsets in Europe, the brokerage is maintaining its 1996 net profit forecast of $100 million.
Grand Hotel Holdings Recommendation: Speculative Buy Brokerage: Sassoon Securities SPECULATION about the privatisation of Grand Hotel Holdings has been circulating the market. The valuation of Grand Tower can be brought up from $1.7 billion or $2.5 per share to a potential $4.1 billion or $6 per share, given an attractive 15 times plot ratio for commercial buildings.
Regardless of the speculation, and with hotel operations unchanged, the counter has the strong fundamental support of a projected profit of 29.2 per cent.
Also, the group is a cash-rich operation with low outstanding debts. With a net asset value of $4.5 a share, the brokerage suggests its downside is limited and a 6.8 per cent dividend yield is extremely attractive.
IDT International Recommendation: Hold Brokerage: Dharmala Securities LCD consumer products maker IDT International's 1995 interim results confirmed a rationalisation programme is showing progress. The brokerage believes the company's net profit will move back to 1991's level.
Sales and margin growth will be geared on expansion in volume. Centralisation should also improve operational efficiency. As further investments are planned with capital expenditure of around $10 million each year, the company's payout ratio will definitely be less than 50 per cent. The brokerage believes payout will be stable at six cents for 1996 and 1997.
This translates to a 4.7 per cent yield based on current price. Trading at a prospective P/E of 5.2 times and 4.5 times for 1995 and 1996 respectively, the counter is fairly valued.
Hang Lung Recommendation: Sell Brokerage: Seapower Securities HANG LUNG'S land bank is limited with only five plots - three in Hong Kong and two in Shanghai - reserved for development beyond 1996, including the residential site in Ma On Shan it bought in the latest land auction. Worse still its land was usually acquired at relatively high prices.
Around $520 million of the 1995 interim net profit of $964.8 million came from its subsidiaries Amoy and Grand Hotel. The rest was mainly from property development, with 750 units sold, mostly in Tai Hing Garden in Tuen Mun. The company successfully marketed its Kornville project in Quarry Bay at a competitive price in February. As it applies the 'percentage of completion' method to book its pre-sale profit, most of the earnings from this project will be booked in the financial year 1995.