Toy firm ready to bounce back
Harbour Ring International Recommendation: Long-term buy Brokerage: Cheerful Securities HARBOUR Ring International is the largest toy-maker in Hong Kong, and has recently begun to engage in toy distribution and property investment.
The company's net profit fell by 59.5 per cent in the 1995 financial year due to the lack of exceptional gains and soaring raw material prices. Medium-term outlook is improving and the company is in an excellent financial position with $500 million cash on hand and a long-term debt to equity ratio of just 3.4 per cent.
The company has also been supporting its share price through consistent repurchasing of shares and indicated it might continue to do this when the counter is trading below $1.
Consolidated Electric Power Asia Recommendation: Sell Brokerage: W. I. Carr CONSOLIDATED Electric Power Asia develops and operates power station projects in the Philippines, China, and Singapore.
Technical problems continue at its Shajiao C plant in China and these have reduced the estimated early completion bonus for the plant by 28.6 per cent to $233.7 million. The net profit forecast for the company for the 1996 financial year has been lowered to $880 million, 32.9 per cent below the consensus forecast of $1.31 billion.
Further uncertainty remains over Shajiao C as the company may be forced to adopt a 10-year depreciation policy which could cut the estimated contribution from the plant by 54.6 per cent in the 1997 financial year.
Jingwei Textile Machinery Co Recommendation: Hold Brokerage: Seapower Securities JINGWEI Textile Machinery manufactures and sells textile machinery and related components.
The company, which listed H shares in February, has just reported its final result showing a 52.9 per cent net profit growth resulting from increasing demand and a lower corporate tax rate. Demand for textile machinery is likely to be more moderate this year but the company is planning to counter this by increasing production of higher profit margin rotor spinning machines.
One cause of concern is that the company has pledged to issue 23 million A shares before April 1997 and this will bring about a 6 per cent earnings dilution.
