CITIC Resources

Stock code:1205.HK

Last close: HK$4.21

Entry: Below HK$4

Target: HK$5

Stop loss: HK$3.75

By Castor Pang

CITIC Resources found a new oil field in Indonesia recently, which will increase the verified and credible oil reserve to over 20 million barrels. It is expected to boost the company's daily oil output by 40 percent when it begins production.

Also, its oil project in Kazakhstan began contributing to the company's accounts in 2007, leaving its oil operations as a second significant source of earnings. That oil field also saw its production capacity rise recently and it is expected to noticeably improve the company's performance this year.

Since its share price has climbed above the neckline of the last reversed head-and-shoulder movement that started in January, the general upward mobility is expected to continue, with the next target set at HK$5.4. Investors may buy this stock when its price reaches HK$4 and look forward to HK$5, but should stop loss if it falls below HK$3.75.

The author is a strategist with Sun Hung Kai Financial Group.

Xinyu Hengdeli

Stock code: 3389.HK

Last close: HK$3.59

Entry: HK$3.50

Target: HK$4

Stop loss: HK$3.10

By Patrick Shum

Xinyu Hengdeli is a leading timepiece retail chain on the mainland with a nationwide sales network. As the nation's per capita income rose over the years, market demands for luxury consumer goods have gone up as well and Xinyu Hengdeli's annual profit has reflected the trend as it grew from 50 million yuan to 445 million yuan in recent years.

The company just announced the plan to acquire an 80 percent stake in a gems dealer for 360 million yuan, indicating the timepiece retailer is stepping into the gemstone market. Thanks to the promise by the gems dealer that no less than 80 million yuan in annual profit is guaranteed for the nest two years, the acquisition should boost the company's profits by 6 to 7 percent a year.

Xinyu Hengdeli's projected price-to-earnings ratio is reasonably set at 17 times and its shares appeared to have been oversold recently. Investors may buy this pick at HK$3.50 and look forward to HK$4, but stop loss once it dips below HK$3.10.

The author is executive director of Karl Thomson Investment Consultants Limited.

CNOOC

Stock close: 0883.HK

Last close: HK$14.90

By Dickie Wong

CNOOC reported 24.03 billion yuan in first-quarter earnings, an increase of 61.8 percent year on year.

The better-than-estimated performance came as a result of rising crude-oil prices and production capacity, which grew by 5 percent year on year to the equivalent of 496,800 barrels a day, while the average crude price reached the equivalent of $88.76 a barrel for a 69.2 percent leap year on year.

The company did not disclose all the relevant figures in its 2008 first-quarter report, but it is expected to pay more windfall tax (also known as special earnings tax) as international oil price continues to soar.

The fact that the central government has not raised the taxable level of windfall tax with the rising international crude price means mainland oil product suppliers such as PetroChina (0857.HK) and Sinopec (0386.HK) are making less profits as their output grows, but CNOOC, which does not process oil at all, will benefit much more than PetroChina and Sinopec do when the windfall tax starting mark is elevated, if recent reports of such a move by the central authorities actually pan out.

Technically CNOOC saw its share price slide down from a new high of HK$17.60 and began rebounding after hitting HK$9.25 on January 12, but it ran into resistance again at HK$13.60 recently and investors should buy its shares when the price falls to the HK$13.50 level just to play it safe. It is expected to meet strong resistance at HK$15 in the near future and investors may hold CNOOC stocks as long as the price stays above the 50-day moving average of HK$12.70.

The author is a director of Friedmann Pacific Investment Holdings Limited.

Champion REIT

Stock code: 2778.HK

Last close: HK$4.10

By Marco Mak

Subject to the finalization of the financial arrangements, the REIT will acquire from Great Eagle (0041.HK), which owns 48.5 percent of the REIT, the retained office floors and the shopping mall of Langham Place in Mongkok for HK$12.5 billion.

If the acquisition is to proceed, the financial engineering that serves to enhance distributions to unit holders through an interest swap arrangement and waiving part of the distributions to the major shareholders of the REIT will be removed. The REIT's future distributions will then depend entirely on underlying rental income.

In our view, the acquisition and the related financial changes are positive, as the REIT will be backed by two major investment properties with a more diversified tenant portfolio and it will be more financially transparent.

Pending the completion of the acquisition, we maintain our forecasts for the REIT based on the projected rental income from Citibank Plaza. Rental income growth from the property will be underpinned by the ongoing rise in rents. The monthly passing rents surged from HK$38/sf to HK$67/sf over the past year, while spot rents reached HK$100/sf at the end of the year and increased further to HK$115/sf recently.

The author is an analyst of Taifook Securities.

(HK Edition 05/19/2008 page2)