Drop in Hong Kong business undercuts Shangri-La Asia

PUBLISHED : Sunday, 06 September, 1998, 12:00am
UPDATED : Sunday, 06 September, 1998, 12:00am

Shangri-La Asia Recommendation: Sell Brokerage: Indosuez W.I.

Carr Securities INTERIM results were much worse than expected, with net profit falling 49 per cent to $240.7 million, mainly caused by weaker demand and regional currency devaluations.

The group derived most of its income from Hong Kong and a significant decline in the number of Japanese visitors had contributed to a 61 per cent drop in Hong Kong's contribution, the broker said.

'Shangri-La Asia's shares are over-valued following their recent relative and absolute outperformance,' the brokerage said. 'The gains came in spite of a lack of fundamental reasons and they are likely to be fleeting.' Beijing Enterprises Recommendation: Underperform Brokerage: Salomon Smith Barney BEIJING Enterprises has interests in retail, fast-food, tourism, infrastructure and food and beverage products.

Tougher operating conditions are making life difficult in most of its core businesses, except Yanjing Brewery.

The red chip is trading 88 per cent lower than its peak in the wake of its now famous 1,275 times subscribed initial public offering.

The brokerage said that despite the huge drop, valuations remained uncompelling. 'We argue that a quick rebound is not imminent, given problems in the existing businesses and restriction in cash allocation,' it said.

Shenzhen Expressway Co Recommendation: Buy Brokerage: Merrill Lynch THE H share is involved in the development, operation and management of toll expressways and highways in Shenzhen City.

Merrill has an intermediate buy and a long-term accumulate call on the stock, saying it offers high earnings growth, financial strength and attractive valuations.

It said the company benefited from an increase in toll revenue and a rise in interest income and should record high profit growth in the next three years.