Haeco Recommendation: Sell Brokerage: WI Carr HONG KONG Aviation Engineering Co (Haeco) is the largest aircraft maintenance and repair operator at Hong Kong's airport. The company's net profits in the first-half slid back 22 per cent on the back of a 9.2 per cent decline in turnover and the dividend was cut 15.4 per cent. The regional downturn is taking its toll on the airline industry, which in turn has had a negative impact on Haeco's bottom line. The operating margin slipped and higher costs at the new airport, Chek Lap Kok, will keep margins under pressure. Haeco is also facing competition in its home market following the opening of Chek Lap Kok, having surrendered its previous near monopoly at Kai Tak. We do not expect a turnaround for at least 12 to 18 months. Union Bank Recommendation: Sell Brokerage: Nomura Securities ALTHOUGH Union Bank looks attractive on a valuation basis, with a price to book of less than 0.4 times, Nomura feels that there are better values at lower risk in the mid-cap banking sector. The bank's interim results, announced last week, were down 25 per cent year on year. In the next year, Union Bank will continue posting disappointing results, Nomura says, because it has under-provided for its existed and expected non-performing loans. Bank of East Asia Recommendation: Sell Brokerage: ABN Amro THE bank's interim net profit fell 30.4 per cent, in line with declines at Hong Kong's medium-sized banks. Of greater concern to the brokerage was management's comment that 40 per cent of non-performing loans are uncollateralised. That ratio is felt to be more consistent with that of the banking sectors in more distressed parts of Southeast Asia than in Hong Kong.