SEAPOWER Resources International (SRI) has a solid high quality earnings base and former stock exchange chief executive Francis Yuen is finally putting its huge cash-flow resources to high-growth use.
There are signs that he is already succeeding, but the share price has yet to react.
SRI, formed from a restructuring of Trafalgar Housing, currently controls 55 per cent of Hongkong's cold storage business.
Operating costs of cold storage are low, and with steadily increasing demand for frozen food, and expanding food transshipment from China, the outlook is positive. This provides enormous and dependable cash flow.
Mr Yuen has a three-fold strategy for channelling this into higher-growth areas: financial services, in which he has an excellent track record; foodstuffs, in order to exploit synergies with its storage business; and property development in a light industrial zone which can house its food processing operations.
In the year to March, earnings will be virtually confined to the group's core business of cold storage. Morgan Grenfell Asia forecasts this will result in net profit of $89 million, a 41 per cent increase from last year.
SRI has substantial cash resources, following the conversion of its 1992 warrants, but these led to significant earnings dilution, and on yesterday's closing price of $1.13, it is trading on a price-earnings multiple of 13.