KONG Wah Holdings has never been a fashionable stock. One of Hong Kong's largest consumer electronics companies, it has the advantages of size, Chinese production and excellent mainland connections, but earnings growth has been unexciting and the share's performance has been, at best, appalling.
However, the current outlook is extremely positive, and with average annual earnings per share growth of 24 per cent forecast for the next three years, the shares could make up for lost time.
The company recently announced unexciting figures for the year to March, with profit rising just $4 million to $178 million on a 13 per cent increase in sales.
However, 1993 was a year of consolidation, with the company carrying the financial burden of an aggressive increase in production capacity in China, without gaining the benefits. These will come through over the next two years.
Kong Wah is primarily a manufacturer of colour televisions. It is the major shareholder of Shenzhen-listed Konka, holding a 35 per cent stake.
In addition, it has set up joint-venture facilities in Zhongshan and Tianjin, which are expanding the product range into telecommunications, audio products and air-conditioners.
The company's exposure to Chinese manufacturing carries implicit dangers, given US growls over China's Most Favoured Nation trade status, but the company has lowered the risks by expanding its production base to Malaysia and Britain, which can handle orders for the US and European markets.
