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SCMP Reporter

EK Chor China Motorcycle Co has proven a formidable rival for the attention of US investors among mainland-backed enterprises listed or to be listed in New York.

  Ek Chor, which is controlled by C.P. Pokphand, is about 10 months behind the state-owned Brilliance China and a month ahead of China Tire in the race for listing on the New York Stock Exchange.

  On July 6, when the enterprise became the first China-based joint venture listed in New York, its share price soared to US$26, compared with the offer price of $21.

  Since then, the shares have stayed firmly in the range of $23 to $25.

  Brilliance China and China Tire produce mini-buses and tyres, respectively, mainly targeting mainland buyers.

   Despite all three being engaged in transport-related product manufacturing, analysts believe Ek Chor will command the higher rating among US investors.

   SBCI Asia associate director Lawrence Ang maintains that Ek Chor is the best prospect among the three mainland stocks listed or to be listed in New York.

  ''The others . . . do not seem to enjoy the same rating as Ek Chor with its huge growth potential in the motorcycle market in China,'' he says.

   Mr Ang points out that although both Brilliance China and China Tire are transport-related stocks, they face keener competition in their industries.

  ''The car industry will see a lot more mainland participants in addition to foreign competition as a result of China's re-entry into GATT [General Agreement on Tariffs and Trade],'' says Mr Ang.

  Since the launch of economic reform, demand for motorcycles has increased significantly.

  According to China National Automobile Industry Corp (CNAIC), which is the government co-ordinator of China's automotive and motorcycle industries, the number of motorcycles in use in China has increased from about 406,000 in 1983 to about eight million this year.

    Demand exceeds supply of motorcycles in China, and CNAIC expects this situation to continue over the next three to five years.

  Today only four manufacturers, including Shanghai Ek Chor, have an annual production capacity of 200,000 machines or more.

  Ek Chor presently is involved in four joint ventures - Shanghai Ek Chor Motorcycle, Luoyang Northern Ek Chor Motorcycle, Shanghai Ek Chor General Machinery and Zhan Jiang Deni Carburetor.

   Shanghai Ek Chor Motorcycle and Luoyang Ek Chor Motorcycle, which combined to provide 83 per cent of Ek Chor's total income last year, are engaged in the design, manufacture and sale of motorcycles.

  They are the fourth and sixth largest manufacturers of motorcycles in China, producing a total of 292,577 machines last year, 15 per cent of the country's total production.

  General Machinery, contributing about 17 per cent of the company's total earnings, is the leading domestic manufacturer of automotive air-conditioner compressors in China.

  It is estimated that General Machinery produces about 32 per cent of the total air-conditioner compressors used in China's domestic motor vehicle production.

  The fourth venture, Zhan Jiang Deni Carburetor, produces motorcycle and car carburettors. Established in January this year, it is not expected to make any contribution to Ek Chor in the year.

  Typical of many mainland manufacturers, Ek Chor is also faced with the ''GATT threat''.

  On one hand, China's re-entry into GATT would benefit Ek Chor by reducing the cost of imported parts and components used in its products, lower tariffs and reduced import restrictions.

  But it also could lead to increased competition in sales of products such as motorcycles, air conditioner compressors and carburetors.

  Japanese automotive giants including Honda and Suzuki have formed joint ventures with mainland companies for motorcycle production, which will lead to greater competition in the industry.

  The emerging threat posed by local competitors is also a concern.

  At present, manufacturers controlled by the military account for a substantial portion of China's motorcycle production.

  A greater number of military factories are being converted to civilian production.

  Shanghai Ek Chor Motorcycle deputy general manager Charas Chitkittichamras said the company planned to increase the share of exports to total turnover from five per cent to about 25 per cent.

  The company produces mainly machines with engine displacements of 125cc, the most popular and fastest-growing segment of the Chinese market.

  Ek Chor plans to increase production of 125cc models by setting up a new plant in the Pudong new development zone.

  When completed in 1995, the plant will have an annual production capacity of 400,000 motorcycles and 600,000 engines.

  Last year, Ek Chor's net profit increased 42 per cent to 66.9 million yuan (about HK$90.3 million at the official rate) from 47.2 million yuan in 1991, mainly due to 22 per cent and 86 per cent increases in net profits from Shanghai Ek Chor Motorcycle and General Machinery, respectively.

  The inclusion of Ek Chor's share in the earnings of Luoyang Ek Chor Motorcycle, which commenced operations in March last year, is also a crucial factor.

  Ek Chor is expected to record strong profit increases this year, with its net profit already estimated to grow by 57 per cent to 21.8 million yuan in the first quarter.



Ek Chor is Wall Street's easy rider