Sun Hung Kai Properties

Entry: HK$127

Target: HK$134

Stop loss: HK$121

Last close: HK$126.80

By Castor Pang

The clouds over Sun Kung Kai Property's future cleared after Monday's court ruling, which has effectively ended the infighting between key members of the leading property developer's management team.

With the market widely anticipating that its current chairman of the board will be replaced soon, it is believed that this issue will not seriously affect the company's future development.

For this reason, it is safe to say that the recent drop in the company's share price was a reflection of undue pessimism among investors, as evidenced by the fact that its share price has begun to rebound after falling below the 250-day moving average.

This suggests there is considerable support for it at that level.

We believe the company's stock can sustain an upward short run and would suggest that investors buy this pick at the HK$127 level for a rise to HK$134, but they should stop loss once the price falls below HK$121.

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

Casil Telecommunications Holdings Ltd

Stock code: 1185.HK

Last close: HK$0.70

Target: HK$1

Support: HK$0.65

By Lai Wai-shing

Casil telecommunications Holdings Ltd (Castel) is not only directly under the jurisdiction of China Academy of Launch Vehicle Technology (CALT) but also enjoys considerable advantage in telecommunications products and the design, installation, maintenance and post-sales service of satellite positioning systems.

Also considering it has issued more shares to finance the acquisition of some assets from its mother company, Castel can be expected to enter a long-term profit growth period with promising prospects.

Castel's commitment to expanding its core businesses such as telecommunications products, intelligent traffic control systems and wireless broadband access can be seen in several projects of acquisition and expansion in recent years.

It also continues to supply competitive telecom equipment to China Mobile (0941.HK), China Unicom (10762), China Telecom (0728.HK), China Netcom (0906.HK) and China Railcom to ensure stable profits growth.

On that note it is good to know the construction, maintenance and management of its wind power farms and equipment are going well, including Jiangsu Longyuan Wind Power Co Ltd, which has begun generating profit as well as electricity, and another wind power farm in Benxi, Liaoning province, which is in the final stage of construction and has started generating profit.

Though Castel has been seeing red in the past few years as it recorded losses of 29.78 million yuan in 2005, 64.56 million yuan in 2006 and 573 million yuan in 2007, there is reason to believe the company will turn black and enter a profit-making period.

The author is a senior independent commentator.

China Merchants Bank

Stock code: 3968.HK

Last close: HK$27.80

By Paul Lee

We remain positive on China Merchant Bank (CMB)'s prospects following a recent meeting with the company's management.

Despite being valued at a premium to peers, the group has proven its resilience time and again. The impact of economic austerity measures on CMB has been relatively mild to date, as CMB looks poised for another year of strong growth in FY08.

The only major foreseeable near-term negative is management overpaying for potential overseas acquisitions that could dilute earnings.

CMB's loan quota will limit FY08 loan growth to 13 percent, with the current year's first quarter growth rate of 4.5 percent hitting the 35 percent limit of the annual target. Management has indicated that corporate loan demand remains very strong despite the PBOC-imposed quotas. This has enabled the bank to expand its loan spreads above the benchmark rates, in part by making determined efforts to gain exposure to SMEs.

Even after a spectacular 124 percent year-on-year rise in FY07 net profits, there were few signs of renminbi letting up on growth, as its first quarter of 2008 bottomline expansion accelerated further to 157 percent year-on-year to 6.3 billion yuan (EPS: 0.43 yuan) on the back of 74 percent and 105 percent respective surges in net interest income and fee income.

Management has detected no sign of asset quality deterioration.

In fact, the absolute balance of NPLs has fallen by 371 million yuan despite an expanding loan book, resulting in a 12-basic point fall in the NPL ratio to 1.42 percent.

An affiliated company(ies) of Taifook Research Limited make(s) a market in the securities herein covered and/or any warrants or options on these securities herein covered.

The author is an analyst with Taifook Securities.

(HK Edition 05/28/2008 page3)