IT has been a while since the Lai Sun group was last in the right businesses at the right time, but with United States demand for garments on a radical up-swing, the Hongkong property market remaining strong and retailers booming, the company shares look attractive even in today's somewhat frothy market. The company is the most exposed of Hongkong's garment companies to the US market, which accounts for 95 per cent of sales. This is a massive bonus, since competitors such as Laws International have already demonstrated the sudden improvement in the US market. This should become evident in its interim results, which are due to be announced shortly. But the stock has yet to fully reflect the company's improving operating environment, lagging at $3, still below its 1992 high of $3.20. The one negative for the company is that the unevenness of subsidiary Lai Sun Development's property development schedule means that a substantial decline in sales income will lead to a fall in the parent's profit this year. However, there is a strong likelihood that the property company will smooth out earnings through an investment sale, such as a block of Baguio Villas; and the parent company's shares look cheap, even without bonus profits. The Estimate Directory gives an average brokers' earnings forecast of $515 million for the year to July 1993, representing an 11 per cent decline, but leaving the shares on a price-earnings ratio of 7.5 and yield of five per cent. This is exceptionally cheap, since the company is looking at major growth in the following year, and its volatile earnings pattern will be significantly improved further into the future. The garment business will always be cyclical, but as a Hongkong-based operation, the group is not vulnerable to non-renewal of China's Most Favoured Nation status, and the outlook for sales over the next two years looks positive. Lai Sun Garment's 53 per cent-owned subsidiary Lai Sun Development is in aggressive mood, expanding its operations into China, and buying the landmark Ritz Carlton Hotel. The company has suffered from highly volatile earnings in the past, but with Causeway Plaza II coming on stream and virtually fully leased, recurrent income will surge in the current year. China is providing it with the long-term land bank that it lacks, and it has a healthy development schedule over the next three years. Development profits will sky-rocket in the next financial year, because of the sale of its Repulse Bay luxury development. Lai Sun Garment also owns 61.3 per cent of Crocodile, a garment retailer which is benefiting from increased consumer spending, and also has a mainland flavour through more than 10 franchise outlets in southern China. The surge in development profits pushes the average forecast for 1993-94 up to $720 million, leaving the shares on an unjustifiable price-earnings ratio of 5.35. The reputation of Lai Sun's management has suffered from some dreadful share dealing transactions and unfortunate inter-group asset trading. However, it has made efforts to improve this. The share portfolio is gone, and its recent behaviour appears beyond reproach. Attitudes take a long time to turn, but even so, the current rating is at a remarkably steep discount, and the shares look worth picking up at current levels.