Guangzhou Investment Recommendation: Sell Brokerage: Credit Lyonnais Securities Asia GUANGZHOU Investment is a holding company whose subsidiaries trade, develop and invest in properties in Hong Kong and manufacture and distribute cement, newsprint and corrugated paper in China. The group's China developments are unlikely to contribute significantly before 1997 as projects slated for commercial development are rescheduled as residential projects. The move to diversify into cement has met with limited success as demand sagged and prices fell in 1995, bringing earnings from cement down 50 per cent from 1994. Infrastructure investment has been expensive, placing a heavy load on the balance sheet for assets, with limited growth potential. Sinocan Holdings Recommendation: Buy Brokerage: Wheelock NatWest SINOCAN manufactures three-piece cans for use in the beverage and food industries and provides tin-plate process, lacquering, and printing services. Sinocan had an encouraging response from both new and old customers after it started to solicit extra business, and order books are full for six months in advance against the previous two to three months. The new factory in Shanghai should start production next month, with output of 100 million cans in fiscal year 1996. The cost of tin plate will rise slightly this year. However, it will largely be neutralised by the reduction in China's import tariff from 7 per cent to 5 per cent. China Light & Power Recommendation: Hold Brokerage: Salomon BrothersCHINA Light supplies electricity to Kowloon and the New Territories and exports power supplies to Guangdong Province. Slowing core earnings growth in Hong Kong is likely to create a big 'valley' in China Light's earnings stream over the next few years, limiting the stocks potential. The company's plan to become an independent power producer (IPP) in Asia is positive but IPP earnings are unlikely to make an earnings contribution until 2000 or 2001. Its recent approval from China's State Planning Commission to build a 3,600 MW power station in Shandong was expected and the new project will not contribute to earnings in the first three to five years.
