Goldlion Holdings Recommendation: Sell Brokerage: Crosby Securities Since its initial public offer in late 1992, Goldlion's share price has climbed from $2.70 to a high of $11 before falling to $8. As others in the consumer play group, including Giordano, Fairwood, and Cafe de Coral whose stocks have been bid up to P/E multiples over 20 times, Goldlion is set for a big correction.
Goldlion has been one of the most successful Hongkong companies building a significant brand name in the territory and the mainland in luxury goods.
With its fast-growing China business, expected to be over half of total sales by the end of FY 1993, the company has developed a high exposure to the mainland retailing environment. But there are big risks in the short term for companies exposed to the China retail market: the effect of government curbs on the economy; a proposed tax on retailers; yuan devaluation and the effects of the investment required in China on margins.
Century City International Recommendation: Buy Brokerage: Vickers Ballas Century City recently reported net profits of $333 million for 1992, up 23 per cent on the previous year.
The significant shortfall in profits from property development and trading was more than made up with a $100 million quantum rise in investment dealing gains, together with higher rental income and a better contribution from Regal Hotels, owned 49.9 per cent by Paliburg, its 70 per cent-held subsidiary.
The group is expected to register impressive earnings growth this year and further, out-powered by a big improvement in rental income and development gains with the completion of the Kowloon City Plaza and the two office/commercial projects at Wan Chai and Des Voeux Road West. Meanwhile, further gains will be locked in from its share investments.
The prospects for Regal Hotels are promising this year and through 1994 and there will be a steady improvement in the profit contribution to Century City.