About a year ago DBS Vickers Securities reiterated its 'buy' rating on Shanghai Real Estate after it reported a 51 per cent year-on-year interim profit increase to $52.7 million, which exceeded expectations.
In the first half, it sold 35,800 square metres of gross floor area. Although it was 8 per cent less than in the first half of 2003, its margin rose to 31 per cent from 23 per cent.
The margin boost should allow it to withstand the expected market consolidation, while undemanding valuation should limit downside risks, DBS said. From the strong results, it was apparent concerns over a slowing housing market in Shanghai had not affected the firm.
While it believed the market would pull back moderately, DBS Vickers said the impact on the firm's earnings appeared limited, particularly with its robust sales and earnings growth. The counter was trading at 61 cents a year ago.
In April, it reported a 2004 net profit of $223.09 million, 143 per cent growth year on year. Turnover rose 52 per cent to $1.25 billion.
Last month, it posted a $77.8 million net profit for the first half of this year, a 36 per cent rise from last year. Turnover rose 15.44 per cent to $441.18 million.
