SELL
China Resources Enterprise Merrill Lynch has maintained its 'sell' rating on the company despite its slower retail expansion in China, focus on reducing costs and upgrades to its logistics systems. Analyst David Chui has largely maintained his earnings estimates between this year and 2005, but said that because of the changes he no longer considered the downside risks for his present forecasts to be significant. Nevertheless, he remains cautious on the conglomerate and was waiting for signs of success in the execution of its revised strategy before reassessing his recommendation. Mr Chui said the stock still looked expensive at 11.5 times this year's expected earnings.
BUY
ICBC Asia DBS Vickers Securities has initiated coverage with a 'buy' rating, saying the bank's intention of acquiring Chekiang First Bank would draw more attention to the stock. Analyst Tony Liu said ICBC Asia's full backing by parent ICBC had allowed Hong Kong's seventh-largest bank to become a 'unique niche player'. He said the bank had the potential to be a 'significant player in the sector' with a return on equity of 11 per cent and an attractive yield of 6 per cent based on 0.81 times estimated book value next year. Mr Liu has a price target of $8.10 for the stock. The counter closed yesterday at $6.35.
BUY
Wharf (Holdings) Daiwa Institute of Research has upgraded its rating on Wharf on valuation grounds, in the process downgrading Wheelock, the conglomerate's parent company. The brokerage expected Wharf to outperform the Hang Seng Index by 15 per cent over the next six months, while Wheelock was expected to perform within 5 per cent during the same period. Analyst Jonas Kan said he recommended investors switch from Wheelock to Wharf, and noted Wharf's share price was still 9 per cent below its pre-Sars levels. He has a target price of $17.10 for the stock. The counter closed yesterday at $15.20. Mr Kan said Wharf accounted for 121 per cent of Wheelock's net asset value, yet Wheelock had outperformed Wharf by 25.4 per cent in the past six months. He said this was due to Wheelock's privatisation appeal. Mr Kan said Wharf was trading at 12.4 times this year's expected earnings - lower than Wheelock's 19.1 ratio.