Guangdong Investment Limited Recommendation: Buy Brokerage: Sassoon Securities TO SHIFT away from the highly risky residential property market in China, Guangdong Investment is gradually selling out its development rights in remote areas such as Huizhou and Qingyuan. It also is increasing its exposure in commercial property investments in Guangzhou, as well as in infrastructure investments. These include the proposed acquisition of the 400-megawatt Shaoguan Power Plant which should generate $184 million per annum over 20 years. The commercial development of Tianhe City will garner rental income of approximately $300 million per annum, from 1997 onwards. The current rental yield in commercial property in Guangzhou is about 15 per cent, compared to eight per cent in Hong Kong. The company intends to spin off Guangdong Tours in the near future, and to expand its market share in the malting and brewery industry in China, which is forecast to achieve growth of 20 per cent in sales volume. Wheelock and Company Recommendation: Hold Brokerage: Morgan Grenfell Asia Wheelock's major subsidiaries and associates all reported good results. Its subsidiary Wharf's interim results were 44 per cent higher, boosted by gains on IBA Building ($138 million) and units in Wharf Cable Tower ($340 million). Excluding property sales,recurrent profit of $903 million was stagnant over the previous period. Development profits will contribute about 30 per cent to the bottom line in the next three years, derived mostly through HK Realty and Trust, though Wheelock also has a 60 per cent share in the Diamond Hill project. The group's land bank, however, will be largely depleted by 1996. Aggressive replenishment is expected mainly via land auctions. The rejuvenation of Wheelock from a passive holding company into an active conglomerate is an exciting development; its share price has risen 55 per cent since late September, and it no longer offers a cheap entry into Wharf. Bank of East Asia Recommendation: Sell Brokerage: Standard Chartered Securities Bank of East Asia is by far the most aggressive lender to local branches of Chinese banks. The lion's share of this lending is focused on residential mortgages in the mainland. All lending in this area, however, is made to Hong Kong residents. With lending rates of prime plus 2.5 per cent on China-related mortgages against prime plus 1.75 per cent in Hong Kong, this lending tends to bump up overall interest income. However, with the stock trading on a 1994 prospective price-earnings ratio of 15.9 times, the highest of all local banks, the stock seems to have been fully valued.