What the broker says... Hong Kong-based Sun Hung Kai Properties (SHKP) specialises in the development of and investment in properties for sale and rent. SHKP recently announced that its earnings increased 2 per cent to HK$8.5 billion, which was in line with analysts expectations. Pre-tax contribution from the group's property development division reached HK$4.8 billion, due mainly to the contribution from its Leighton Hill project. According to a recent report by KGI Asia, SHKP will suffer less from the present property price war because of its successful sales strategy and premium brand name. However, with the declined profit margin, contribution from the property development income was expected to decline to HK$3.1 billion next year, KGI said. 'Hence, we expect their earnings for the coming year to remain flat.' KGI recommends a 'trading buy' on the counter when it returns to the HK$46 level. What the broker said... The Far East Pharmaceutical group is mainly involved in the manufacture and distribution of Chinese medicines. Last year, Fuzhou-based Far East completed a fund-raising deal, involving the issue of US$12 million worth of convertible bonds, which placed the company in a good position to acquire other mainland pharmaceutical firms. After China banned phenylpropanolamine (PPA), company sales in the PPA-free anti-viral drug business surged 24 per cent, while turnover and net profit surged more than 16 per cent. However, in a report released nearly a year ago, Core Pacific-Yamaichi said it felt fierce competition in the mainland pharmaceutical market would make it difficult for Far East to sustain such strong growth. This effect would be further escalated by dilution and loss of tax preference treatment, it said. Core Pacific, therefore, issued an 'accumulate' recommendation on Far East's stock and suggested a price target of HK$1.57.
