Niche player stays sound

Varitronix Recommendation: Buy Brokerage: Smith New Court A STRONG niche player, the fundamentals of Varitronix remain sound. Although the anticipated initial losses of the group's new factory in Malaysia have led to a downward revision of 1993's earnings forecast, the expanded capacity should underpin a 28 per cent rise in the 1994 bottom line.

The group has an established niche in the global LCD market and annual global sales are forecast to jump from US$4 billion to US$16 billion by the year 2000.

Great Eagle Holdings Recommendation: Buy on weakness Brokerage: G K Goh INTERIM earnings fell by 53 per cent to $80.2 million, in line with expectations. Turnover increased by 7.1 per cent to $309.7 million but profit margins were not comparable because there were no contributions from property sales this year.

Citibank Plaza is now 65 per cent occupied and full occupancy is expected soon because of the rising demand for Grade A office space in the Central area. Great Eagle Centre and Astor Plaza are over 95 per cent let. In May the group agreed to sell the London Plaza for $810 million and non-refundable deposits of $81 million have already been received.

Trading on a prospective fully diluted P/E of 16.6 times and 12.2 times of FY94 earnings, it seems slightly overpriced.

Manhattan Card Co Recommendation: Buy Brokerage: S. G. Warburg MCCL rose 38 per cent on the first day of trading, with over 50 per cent of the free float traded. The public offer had been oversubscribed by 40.9 times.

The company's forecast of $215 million for 1993 is slightly conservative. Profit growth in 1994 and 1995 should be sufficiently strong to offset the impact of dilution.

Interest expenses will be cut by the injection of equity, and operating expenses are forecast to decline from 38 per cent to 30 per cent of turnover as economies of scale take effect.

Strong earnings prospects, the potential afforded by CITIC's presence, and a high yield should attract further institutional interest. The shares remain inexpensive against the market and financial sector.

Goldlion Holdings Recommendation: Reduce Brokerage: Morgan Grenfell Short-term prospects are vulnerable to China's recently implemented austerity programme.

Earnings were 34.3 per cent higher than last September's prospectus forecast. This would have been 11 per cent better were it not for the renminbi falling during the second half of the year.

Much of the impetus behind the strong performance stemmed from the China market. Over 600 mainland outlets now carry Goldlion products, while the specialty chain will number 26 by early next year.

China's deteriorating fundamentals will slow down its sales expansion in the coming year. This, coupled with the recent new issues to raise $130 million and the distribution of two one-for-five bonus warrants, will lead to a drop in fully diluted EPS in the current fiscal year.

After placing out 15 million shares, major shareholders have reduced their stake from 75 per cent to 67.8 per cent.