Lenovo Group

Stock code: 0992.HK

Last close: HK$5.84

Target: HK$6.75

Support: HK$5.59

By Lai Wai-shing

Lenovo Group has been doing really well since it successfully established itself outside China by acquiring IBM's PC division. It not only enjoys the top position for PC sales on the mainland with a 36 percent market share but cornered 8.2 percent of the global market as well.

More noteworthy is that Lenovo's PC sales volume in the Americas grew by 11.5 percent in 2007, thanks to the development of the trade-style business model and improved implementation of the business model following the successful handover of customer service to its own sales team. And this was achieved when the US economy was slowing down under the burden of the subprime debacle.

Lenovo's newly-released annual report (April 2007-March 2008) shows clearly it achieved impressive increases in business turnover across the globe in the last financial year.

This proves Lenovo Group can and did weather an economic downturn in the US and Europe.

The company is apparently enjoying the benefit of development in high-growth markets as its "going overseas" strategy bears fruit.

The author is a senior independent commentator.

Datang Power

Stock code: 0991.HK

Last close: HK$5.32

Entry: HK$5.30

Target: HK$6

Stop loss: HK$4.90

By Castor Pang

In addition to an already strong power production capacity, Datang Power's potential acquisition of mainland coal mines - a move which would go a long way to stabilizing the price of coal for power generation - is keeping the market interested in its shares.

The coal price on the mainland has climbed more than 10 percent this year, a trend which has put growing pressure on the profitability of power generation stocks as a whole.

Little wonder that this is generating enough heat to spark a rebound in recent trading in Datang Power's shares.

This scenario is playing out in a market somewhat discouraged by expectations that the central government has all but abandoned its plans to launch a coal-power price tie-up mechanism in the near future, a measure which seems geared at avoiding rampant price hikes on the mainland.

The price control measures have obviously impacted the profitability of listed power producers and caused a general downslide of these stocks, with Datang Power's falling to HK$4.92 not long ago. But as an investment, its prospects remain positive.

Investors may buy Datang shares when the price falls to around HK$5.30 and look for a rebound up to HK$6. Just remember, there is a chance this stock will drop further once its price falls below HK$4.90, so investors should stop loss as soon as it happens.

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

China Resources Power

Stock code: 0836.HK

Target price: HK$24.20 Last close: HK$20.50

By Anna Yu

China Resources Power (CRP) announced that it will acquire Jiangsu Investment, which holds interests in five coal-fired power plants in Jiangsu province with a total attributable operational capacity of 1,965 MW and another 840 MW of attributable capacity under construction, for a consideration of 2.5 billion yuan. Upon completion of the acquisition, CRP's total attributable capacity will be boosted by 15.7 percent.

Due to the surge in coal costs, the newly acquired power plants' earnings contribution may not be significant. Jiangsu Investment reported a net profit of 181 million yuan for FY07, 5.6 percent of CRP's FY07 earnings. We estimate Jiangsu's earnings contribution in FY08 to account for around 4 percent of CRP's total earnings for the period, as rising coal costs may drag the profitability of coal-fired power plants.

CRP remains our top pick of the power sector, thanks to its effective cost control and higher operating efficiency. Of the five locally-listed mainland power producers, it is the only one that is expected to report positive earnings growth in FY08, helped by an estimated 47 percent year-on-year surge in power generation and a moderate 7 percent growth in unit fuel costs. The target price is HK$24.20.

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 05/30/2008 page3)