Tianjin Bohai Recommendation: Avoid Brokerage: Smith New Court TIANJIN Bohai is one of China's largest producers of marine chemicals. It has significant market shares in its three main products - soda, PVC and caustic soda - all of which have broad applications in downstream industries such as textiles, paper-making, plastics and chemicals.
Given the current economic climate and the drive to rein in growth, a slowdown could well be in store for the company. Although demand for basic chemicals in China will expand rapidly in the long term, complications associated with deregulation are casting doubt on the sector at the moment.
These complications are not adequately reflected in Tianjin Bohai's 1994 prices-earnings ratio of 12.7 times, particularly compared with Yizheng, the latest H-share issue, and given the expectation of a number of high-quality issuers among the second batch.
HKCB Bank Holding Recommendation: Buy Brokerage: Smith New Court HONG KONG Chinese Bank Holdings posted a 130 per cent net profit growth to $237.1 million last year. The brokerage forecasts earnings recovery of 40 per cent this year and 16 per cent in 1995 on the back of continued growth at the bank and new earnings from Lippo Asia.
Deposits grew an estimated 50 per cent, although minimal disclosure inhibits detailed assessment. With about $600 million cash, after purchasing Lippo Asia, the prospect of a more significant financial-services acquisition remains strong.
The tie-up with China Resources, which has a 35 per cent share in Hong Kong Chinese Bank, is good for the bank's local operations and mainland activities. On 13.3 times 1995 earnings the stock is not cheap, but there is scope for earnings enhancing acquisitions and further profit growth in the bank's associate Chinese referrals.
Shanghai Petrochemical Recommendation: Buy Brokerage: Seapower Securities SHANGHAI Petrochemical posted last year's final results with net profit of 870 million yuan (HK$774 million), representing a 96 per cent leap over the previous year. The results were ahead of the prospectus forecast but were slightly disappointing for the market, which was overwhelmed by the encouraging interim results for the first half-year.