China Resources Enterprise Recommendation: Buy Brokerage: Jardine Fleming CHINA Resources is a mainland-backed conglomerate with interests in property, food and beverages, infrastructure, and finance. China Resources has not made any major acquisitions in recent months but this is expected to change. All four divisions are expected to make acquisitions in the next 12 months, including the purchase of a considerable land bank in Hong Kong and on the mainland. China Resources is also planning to add a fifth division of consumer products trading, towards which the proposed joint venture with Esprit will be the initial step. Hsin Chong Construction Recommendation: Speculative Buy Brokerage: Cheerful Research HSIN Chong Construction is mainly engaged in private and public sector construction in Hong Kong, the mainland, and Southeast Asia. The firm is one of the few construction groups able to provide a wide range of construction services. The outlook for the local industry seems bright due to the official plans to enhance the provision of housing in the coming decade. Hsin Chong's shares are trading at a moderately high valuation compared with other construction firms, but its wide range of services and possession of mainland permits are a strength. Cosco Pacific Recommendation: Hold Brokerage: Nikko Research Centre COSCO Pacific is a red chip company involved in the container leasing business and the provision of container management services. The firm announced an 85 per cent increase in net profit to US$59.8 million for the first half of the year, in line with expectations. Cosco's mainland parent, the China Ocean Shipping Co has announced a reorganisation plan for the firm but did not give any specific details of asset injections. Cosco is trading at an expensive valuation but expectations of an asset injection should continue to support the share price. Shanghai Petrochemical Co Recommendation: Buy Brokerage: Salomon Brothers Shanghai Petrochemical is an H-share company which operates a petrochemical complex producing a range of synthetic fibres, resins, plastics, and petroleum products. This year should mark the cyclical trough for the firm's earnings with earnings per share (EPS) expected to grow 19 per cent in 1998 helped by crude oil cost reductions, and adjustments to product mix. A recovery in commodity chemicals and volume increases from capacity expansions should enable the firm to see EPS grow 20 per cent in 1999 and 158 per cent in 2000. The firm is seeking growth through acquisitions, which could aid its profit margins.
