Texwinca Holdings Recommendation: Buy Brokerage: G K Goh THE group is vertically integrated, offering a full range of services from yarn dyeing to fabric finishing. Founded in 1975 as a fabric knitting factory, the group has seen turnover grow from $120.8 million to $416.4 million last year. The group is planning to expand into Dongguan, on the mainland, which will see its knitting and dyeing capacity increase by 57 per cent and 50 per cent respectively. The larger capacity and lower operating costs will increase the group's competitive edge. While many Hongkong-based commodity textile producers are being forced out of business, Texwinca has managed to survive and flourish as a service company to the textile industry. Being a service company, Texwinca does not have to carry a large inventory, which improves cash flow. The group's inventory as a percentage of sales was only two per cent as of March 1992. The group's investment in advanced machinery has resulted in higher quality products and better competitiveness. There is some seasonality to earnings, but the group makes a wide variety of knitted fabrics, catering to all times of the year. Most of the group's fabrics are sold to garment manufacturers in Hongkong. However, since most of them have production plants on the mainland, Texwinca could indirectly be affected by the granting of Most Favoured Nation status to China by the US. Hysan Development Recommendation: Long-term buy Brokerage: Schroders ABOUT 60 per cent of Hysan's 3.4 million square feet of investment portfolio is commercial property located in Causeway Bay. This accounts for about 67 per cent of the company's net asset value, making it well positioned to benefit from improvements in the office sector. During the past few months, the increase in office rent has spread to Causeway Bay, even though supply there is still high. The rental index from Jones Lang Wootton indicates that rents there were up by 4.3 per cent in the last quarter of 1992. Elsewhere, Hysan's 1.36 million square feet of luxury apartments on Hongkong Island still account for about 31 per cent of the company's net asset value. As supply for high-end residential units in convenient locations will remain tight, the negative risk of this portfolio will be limited even as the residential market undergoes correction as a whole. Hysan continues to have a sizeable investment in the Hongkong stock market, with the value of the portfolio at about $2 billion. Although the performance was disappointing during 1992, the dividend payment will at least provide a steady stream of income for the company. Schroders predicts a 10 per cent increase in profits in the financial years 1993 and 1994.