What the broker said
The Far East Pharmaceutical group is mainly involved in the manufacture and distribution of Chinese medicines.
Last year, Fuzhou-based Far East completed a fund-raising deal, involving the issue of US$12 million worth of convertible bonds, which placed the company in a good position to acquire other mainland pharmaceutical firms.
After China banned phenylpropanolamine (PPA), company sales in the PPA-free anti-viral drug business surged 24 per cent, while turnover and net profit surged more than 16 per cent.
However, in a report released nearly a year ago, Core Pacific-Yamaichi said it felt fierce competition in the mainland pharmaceutical market would make it difficult for Far East to sustain such strong growth.
This effect would be further escalated by dilution and loss of tax preference treatment, it said.
Core Pacific, therefore, issued an 'accumulate' recommendation on Far East's stock and suggested a price target of HK$1.57.