Brokerage says Gome may be down but can only go up
Brokerage UBS reckons Gome Electrical Appliances Holding will resume trading in the near future and is tipping the stock will go up.
Gome has been suspended for six months after its founder and at one time the country's richest man, Wong Kwong-yu (below), was arrested for alleged stock market manipulation.
The mainland's largest consumer electronics retail chain has since lost market share to its rivals and will probably take years to return to normal profitability, but UBS makes a case for maintaining its 'buy' call on the stock.
In a research report yesterday, the investment bank cited this week's news that US private equity firm Bain Capital was to make its largest acquisition in China by buying US$200 million in seven-year convertible bonds and US$230 million worth of shares in Gome, which could eventually convert into a 23 per cent holding, just behind Wong's 25 per cent stake.
Also, the Hang Seng Index has risen 42 per cent since Gome shares were suspended at HK$1.12 each on November 21 last year, leading UBS to set a target price of HK$1.51. It backs this up by pointing out that its Hong Kong retail-related portfolio has rebounded almost 80 per cent in the same period.
