Guangdong Investment Recommendation: Buy Brokerage: Dao Heng Securities GUANGDONG Investment has become a medium-size conglomerate with diversified interests covering property, travel and hotels, retail and wholesale, manufacturing, and infrastructure development, with operations principally based in Hongkong and Guangdong province.
Exposure to the rapidly growing Guangdong region will continue to accelerate earnings growth in the years ahead.
The strategy of building up a diversified investment portfolio shows the management's long-term objective of upgrading GDI's earnings quality by reducing reliance on property income.
To enhance growth in earnings per share and net asset value, GDI is expected to acquire ongoing and profitable ventures with short payback periods and low P/E multiples in the manufacturing, infrastructure, retail and wholesale industries in the foreseeable future.
The rewards could be enormous, according to Dao Heng.
Renminbi devaluations should have no material impact on GDI's bottom line as over 65 per cent of its earnings are in hard currencies.
GDI's P/E ratio of nine times Dao Heng's 1994 estimated earnings is low, even taking into account a further 10 per cent drop in the swap rate.