M. C. Packaging Recommendation: Sell Brokerage: Schroders M. C. Packaging (MCP), a manufacturer of two-piece and three-piece cans, and plastic bottles and containers, is well positioned to benefit from consumer spending in China. However, an oversupply of two-piece cans in China in the next three years is likely to cloud MCP's prospects. This oversupply is expected as output climbs from an estimated 1.6 billion units in 1992 to 3.9 billion by 1995, representing an annual compound growth rate of 34 per cent. This situation is likely to depress can prices on the mainland. The market should begin to feel the impact of new plant openings in 1995. However, management expects the oversupply will affect only lower-quality manufacturers. Earnings in 1993 and 1994 are expected to edge marginally higher due to a lack of contributions from China joint ventures. Thereafter, contributions are expected to rise substantially. Despite quality management and growth prospects in China, it is believed that MCP is overvalued at the current rating. Hong Kong Realty Recommendation: Hold Brokerage: Schroders Hong Kong Realty's 1993 interims were better than expected. About half the earnings came from 70 per cent owned Realty Development Corp (RDC), which reported an 8.4 per cent decline in interim profit to $358 million. Hong Kong Realty's interim profit was boosted by the disposal of investment properties, which contributed a $215.5 million gain to operating profit. Of this, $149.4 million came from RDC's disposal of two floors in the Wing On Centre. Despite the promising increase in interim earnings, profit growth for the second half of 1994 is expected to be uninspiring. RDC will continue to contribute significantly as Parc Oasis's Phase V pre-sale (at a record high $6,250 per square foot) should bring in handsome profits. Siu-Fung Ceramics Holdings Recommendation: Buy Brokerage: MeesPierson Siu-Fung Ceramics, listed in October 1993, is the exclusive distributor for nine renowned German ceramics machinery manufacturers in Hong Kong and China, and the owner of Dubois, a producer of handling equipment. Siu-Fung has been growing rapidly in the last three years, increasing its turnover 10-fold from $102 million in 1991 to $1 billion in 1993. It is expected that demand for ceramics and ceramics machinery will continue well into the next decade due to the booming China market and construction sector. It is expected that earnings for next year will exceed the company's projected net profits of $220 million due to better-than-expected performances from joint ventures. Net profits are forecast to increase by 81 per cent to $243 million next year and by 57 per cent to $381 million in 1995.