Kelon a bargain buy

GUANGDONG Kelon is a maker and retailer of household and commercial refrigerators.

Brokerage ABN Amro Securities has a buy recommendation on the stock, saying the sell-off of China plays provides the opportunity to pick up quality companies such as Kelon at bargain prices.

'Dominant players will be beneficiaries of the consolidation in China's home-appliance markets and Kelon stands to gain market share from smaller players,' it says.

ABN predicts earnings growth of 13.8 per cent this year and 14.1 per cent next year. Rural sales are expected to be the main impetus for growth before the start of the replacement cycle in the urban markets after 2000.

'We believe the company is one of the few attractive China plays because of its strong competitive position, solid track record, strong balance sheet and quality management,' ABN says.

With its distribution networks and recognised brand, the company is positioned to benefit from the potential recovery in the mainland consumer market following the government's fiscal stimulation programme.

Stewart Oldfield