Sinotrans

Stock code: 0598.HK

Last close: HK$1.87

By Cho Fook Tat

In FY08, Sinotrans will share an exceptional gain of about 256 million yuan from its 63.5 percent-owned A-share listed subsidiary Sinoair for disposing its 50 percent stake in the Exel-Sinotrans freight forwarding JV to the other partner DHL EXEL.

The JV contributed about 5-10 percent of Sinotrans' recurring earnings during FY05-06.

The earnings gap will be filled after the completion of a logistics asset injection from its parent for a total consideration of 1.1 billion yuan last October.

The proforma earnings contribution of the to-be-acquired assets would have been 16-21 percent of Sinotrans' recurring earnings in FY05-06.

More asset injections may be in the offing, as the exercises are expected to be done in phases within 1-2 years.

Sitting on net cash of 3.7 billion yuan (0.87 yuan/share), the company should be able to finance further acquisitions with its strong internal resources.

All in all, we are looking for a 17 percent increase in the company's recurring FY08 bottomline. Target price is HK$2.80.

An affiliated company(ies) of Taifook Research Limited has, presently or within the last 12 months, an investment banking relationship with the listed corporation herein covered.

The author is an analyst with Taifook Securities.

A50 China Tracker

Stock code: 2823.HK

Entry: HK$14.50

Target: HK$15.80

Stop loss: HK$14

Last close: HK$14.74

By Castor Pang

Recent falls by the Shanghai Composite Index, which have seen it drop below its main support line, have sent a cold chill through the A50 China Tracker.

But it seems that the index is warming up again, thanks to several factors.

With the price of the A50 almost bottoming out, and its RSI (relative strength index) falling as low as 30, it appears investors now regard it as an opportunity, with the risk associated with the short-term buying of these funds decreasing.

Investors are advised to buy at HK$14.50. The target price is HK$15.80 while the stop loss line is HK$14.

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

DaChan Food

Stock code: 3999.HK

Last close: HK$2.40

By Lawrence Chor

As one of the mainland's leading chicken meat processors, the company's vertical business model integrates feed, slaughter and processed food production into a single operational platform.

This enables it to capture the growing chicken meat market with better economies of scale.

DaChan is among our top picks of the mainland food sector, thanks to its stringent quality control and solid strategic business networks.

Strong strategic alliances with key international food chains, including McDonald's, Taco Bell, Pizza Hut and KFC, enable DaChan to maintain a stable demand for meat that offers higher profit margins and lower credit risk.

To maintain a scalable production capacity and enhance market share across the mainland, DaChan continues to expand its production facilities to strategically span over 30 cities on the mainland, Vietnam and Malaysia.

The company will strengthen its leading position in northern China while expanding in the fast-growing central and southern parts and Yangtze River Delta region.

To effectively penetrate the markets and maintain its leading brand image, the company will continue to boost its marketing efforts and streamline its downstream sale channels by focusing on supermarkets, hypermarkets, schools and canteens. Target price is HK$2.85.

An affiliated company(ies) of Taifook Research Limited has, presently or within the last 12 months, an investment banking relationship with the listed corporation herein covered.

The author is an analyst with Taifook Securities.

(HK Edition 06/25/2008 page3)