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SCMP Reporter

Sun Hung Kai Properties Recommendation: Buy Brokerage: MeesPierson Securities THE company reported net earnings of $4.2 billion for the six months to the end of December last year, a rise of 31 per cent over the previous year.

  The results were above expectations after a period of residential property development which produced $8.2 billion in sales.

  Overall profit margins were maintained at around 50 per cent.

  In the second half of 1994, the group should complete and book profits from the sale of 2.4 million square feet of properties, double the space recorded in the first half.

  For the year as a whole, property development should yield $9.2 billion in profit, accounting for 73 per cent of the group's net figure.

  Earnings figures have been revised up from $8.9 billion to $10.89 billion and the counter maintains its outperformance rating for the next six months.

Yizheng Chemical Fibre Recommendation: Buy Brokerage: DBS YIZHENG holds 47 per cent of total polyester polymer production in China and local demand in China is growing. The economy is forecast to expand by an average seven per cent over the next five years, stimulating strong demand for consumer products such as clothing.

  Polyester fibre production in Asia, excluding Japan, is estimated to rise from 5.3 million tonnes in 1992 to 8.76 million tonnes in 1999.

  The small amount of arable land per capita implies a limited availability of naturally-grown fibre which should lead to strong domestic demand for synthetic substitutes.

  The group is also strategically located along the Yangtze River to tap into the industry boom.

  The company is expected to produce 24 per cent compound profit growth over the next three years and it has an attractive price-earnings multiple of 14.3.

Grand Hotel Recommendation: Buy Brokerage: Smith New Court INTERIM results of $65.1 million were in line with expectations and business is expected to continue improving throughout the second half of 1994.

  Occupancy rates at the 90 per cent level have been secured for all three group hotels, meaning room rates have been significantly revised during the year.

  The net asset value estimate for Grand Hotel has been raised to $4.85 a share following recent transactions by the group. The shares trade at a 36 per cent discount to this figure.

  As the group has not yet found meaningful investments, the dividend payout will remain attractive. A final dividend of 11 cents is estimated, bringing the full-year figure to 17 cents.

Hutchison Whampoa Recommendation: Buy Brokerage: Smith New Court THE 1993 results were very good in their own right but changes in accounting presentations mean 107 per cent net profit growth would have been 91 per cent under the old style.

  Despite this, 1994 looks like another good year, with earnings growth of about 10 to 13 per cent, barring any significant change in China.

  Heavy financing needs have been recognised by the cut in the payout ratio for dividends from 55 to 38 per cent. This should be positive, implying a reduction in the risk of future dilution.

  With a 13.9 times price-earnings ratio in 1994 and 12.4 times projected in 1995, the stock looks like a cheaper Wharf and has attracted investments such as the container terminal HIT, investment properties and developments, cable television and China.



Sun Hung Kai tipped to outperform