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SCMP Reporter

Furama Hotel Enterprises Limited Recommendation: Hold Brokerage: Standard Chartered Securities THE Furama Hotel Group recently surprised the market with strong full-year profit results for the year to March 31.

 They were mainly due to the group's recently-commissioned Majestic Hotel and were underpinned by the resurgence in Hong Kong's hotel industry during 1993.

 Joint-venture agreements and related hotel management contracts should see the group expanding its presence into China and Vietnam, albeit some years from now.

 These strong results place the counter on a historic price-earnings ratio (P/E) of 19.3 times and a prospective 1995 financial year P/E of 16.8. This forward earnings projection implies a net profit of $140 million.

 Given the stock is trading on a 1995 P/E multiple in line with the hotel sector average of 16.6, the brokerage rates the stock as a hold.

  Yip's Hang Cheung Recommendation: Long-term buy Brokerage: Seapower Securities THE company has set up factories in southern China near its toy, electronics, printing, shoe and furniture clients, making it more competitive and reducing transport and delivery times.

 Underlying growth, estimated at 25 per cent, is fuelled by the paints division, which has been boosted by sales in northern China. In addition, trading of lubricants is set to take off with estimated sales of $15 million in the current financial year and $35 million in 1995/96.

 Trading in mixed solvents and petrochemical products is growing steadily. The company will sustain stable growth, and underlying earnings remain healthy. The stock is trading at a prospective P/E of 11.3 times.

  Hsin Chong Construction Limited Recommendation: Buy Brokerage: Sassoon Securities NET profits in the last financial year increased 5.3 per cent to $82.1 million over the previous year and the group received several contracts amounting to $1.1 billion.

 With an agreement on the Chek Lap Kok airport expected soon, the amount of public work will increase. The group's long-standing relationships with the Government and Sun Hung Kai Properties provide a sound platform from which to bid for projects.

 At a current share price of $1.15 and a prospective P/E of 8.1, Hsin Chong is cheaper than other construction stocks.

  Hong Kong Electric Holdings Ltd Recommendation: Buy Brokerage: Sassoon Securities THE group will announce a five-year financial budget early next year. Along with investment in the transmission and distribution network, the new plan is likely to exceed $20 billion, from $15 billion in the previous period.

 With slower depreciation rates allowed under the Scheme of Control, Hong Kong Electric's earnings growth will be sustainable in the long run.

  Hong Kong Electric is the most appropriate vehicle for possible investments in China power stations by tycoon Li Ka-shing, who holds 35 per cent of the company through Hutchison Whampoa.

  Although property contributions will not be repeated in 1995, the core utility businesses are high quality and an annual growth rate of 13 per cent is expected for the next five years. The counter is trading at a relatively low 1994 P/E of 13.2 and, with a high dividend yield of 4.3 per cent, it remains attractive.

  Fairwood Holdings Recommendation: Sell Brokerage: Smith New Court FAST food retailer Fairwood reported results substantially below expectations. A highly competitive environment coupled with substantially higher rental costs, together with losses from China operations, reduced operating margins from 8.8 per cent to 4.3 per cent for the year to March 31.

  At associate level, losses from Fairwood's 50 per cent-owned Singapore joint venture continue to be a burden, although the Beijing joint venture is now profitable.

 As a result of the slowdown in China, the group's expansion plans remain confined to the Pearl River Delta. Plans for master kitchens in Shenzhen and Guangzhou have been placed on hold. The brokerage forecasts P/Es of 12 and 11 times for the next two years.



Hotels find room for improvement