Lenovo Group

Stock code: 0992.HK

Last close: HK$6.14

Entry: HK$6.10

Target: HK$7.20

Stop loss: HK$5.60

By Castor Pang

Lenovo Group recently released its 2007 annual report showing that the company achieved remarkable profits growth last year, with a 200 percent increase in net profits surpassing the market's expectations.

The company's market share in the Asia-Pacific region, except Japan, continued to expand, while its market share rose to 36 percent on the mainland and 8.2 percent globally.

Some stock brokers maintained that the contributing effects from Lenovo's acquisition of IBM's PC production department had been fully reflected, tipping that the group might see its overall profitability level out next year due to the flagging North American and European markets.

But Lenovo recently announced plans to develop some of the less-penetrated markets in the coming years, including the Middle East and Turkey, in the hope of offsetting declining growth in other markets.

In addition, the company has achieved better-than-expected growth in Taiwan province, which should help its prospects as a whole.

We, therefore, suggest investors remain optimistic about Lenovo Group for now and buy its shares at HK$6.10 for a rise up to HK$7.20. But they should stop loss once the price falls below HK$5.60.

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

China Aerospace International Holdings Ltd

Stock code: 0031.HK

Target: HK$1.15

Support: HK$0.89

Last close: HK$0.95

By Lai Wai-shing

Market pundits in China and overseas have been hoping the Chinese government will speed up capital injection into the country's aerospace industry, making the aerospace-related stocks all the more worth watching.

The enterprise expected to benefit most directly from such moves by the central authorities is Hong Kong-listed China Aerospace International Holdings Ltd (Casil Group). Particularly noteworthy is that the group has changed its name to the one shown here (Casil) since Jan 30 this year and purchased the land use right of a 105,480-sq m commercial property in the Houhai Central Business Area in Nanshan district of Shenzhen in March for 495 million yuan through a subsidiary in which it holds a 60 percent stake.

The investment has given people another reason to be optimistic about Casil Group.

As for the company's performance, it has been improving in recent years. Its 2007 profits attributable to shareholders increased by 180 percent to 310 million yuan, which more than made up for the discouraging 110-million-yuan profits (down 61.3 percent from 2006) in the year before, while total turnover grew by 10.1 percent thanks to the stable growth of its hi-tech manufacturing business and a number of non-standing earnings.

These include a 9.9 percent increase to 1.66 billion yuan from the production and sales of plastic products, intelligent chargers and liquid crystal display (LCD) panels; a 79.8 percent increase to 9.4 million yuan in trade turnover in electronic products; and a 1.1 percent increase to 16.67 million yuan in property investment.

The author is a senior independent commentator.

China Resources Land

Stock code: 1109.HK

Last close: HK$13.10

By Sophie Wu

China Resources Land (CRL) reported only mild interruptions due to the recent earthquake in Sichuan province, and added that no employees were injured.

It also noted that the company projects have always been built to withstand earthquakes.

Although China Resources Land (CRL)'s projects in Chengdu are not damaged, we are concerned that a decrease in purchasing enthusiasm will inevitably affect sales demand.

According to CRL's completion schedule, Chengdu will respectively account for 67 percent and 36 percent of the total completion GFA in FY08 and FY09. Taking into account a possible slowdown in construction and sales, we have cut our profits forecast for the Chengdu area by 5 percent and 10 percent to HK$735 million and HK$951 million, respectively, for FY08 and FY09.

Except for its Chengdu developments, CRL has also offered its projects in Beijing, Shanghai and Hefei for pre-sale. Newly launched Shanghai and Beijing projects are selling at higher prices this year, contributing to a rise in sales volume and ASP. We also expect increased earnings to be derived from various second-tier cites in FY09, which should provide better geographical risk diversification.

After our review of the possible implications of the earthquake on CRL's business prospects, we have slightly tuned down our profits forecast by 2 percent for FY08 to HK$2.13 billion, up 48 percent year-on-year. The target price is HK$15.80.

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 05/29/2008 page3)