China Overseas

Stock code: 0688.HK

Last close: HK$11.1

Entry: HK$10

Target: HK$12

Stop loss: HK$9.7

By Castor Pang

Over the years China Overseas has evolved into one of the leading mainland property stocks.

The company, which has sufficient cash in hand, is expected to enhance its land reserves and boost its market share as the sector restructures.

At the end of November, its property sales reached HK$25.08 billion, up 34.3 percent year-on-year.

Its total sales area reached 2.489 million sq m, up 30.2 percent year-on-year, which accounted for 90 percent of the total sales target.

In addition, with the consumer price index declining on the mainland, rate reductions are very much likely early next year.

This is expected to drive a rebound in mainland stocks.

It is advised to enter at HK$10 with a target of HK$12.

It is wise to stop loss when it dips below HK$9.7.

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

Li Ning

Stock code: 2331.HK

Last close: HK$11.3

Target: HK$13.42

Support: HK$10.27

By Lai Wai-shing

Central government's move to boost domestic consumption will benefit commodities-related stocks.

Li Ning's profits attributable to shareholders reached 333 million yuan in fiscal year 2008, up 68.3 percent year-on-year.

The company's sales income accounted for 98.1 percent of its total income and its turnover reached 3 billion yuan, up 60.1 percent year-on-year.

Li Ning's orders grew 31.6 percent year-on-year during the financial tsunami period.

The average sales prices for shoe products increased by 10.2 percent year-on-year and orders surged 18.9 percent.

The average sales prices for garment products increased by 11.8 percent year -on-year and orders surged 18.8 percent.

The author is a senior independent commentator.

Pacific Century Premium Developments

Stock code: 0432.HK

Last close: HK$1.68

By Marco Mak

According to the Scheme of Arrangement document detailing the privatization of PCCW (0008.HK), the HK$4.2/ share offer price represents a 9 percent premium over the sumof- the-parts (SOTP) valuation of a maximum of HK$3.86/share for PCCW.

Among the major components, the valuation for the core telecom business is based on the higher tender prices received for the 45 percent stake in the business on offer.

Having rejected all the bids, using even the highest tender price may not justify the fairness of the SOTP valuation.

Another major part is PCCW's 61.5 percent equity interest in Pacific Century Premium Developments (PCPD).

Based on PCPD's NTAV (net tangible asset value) of HK$7.8 billion as at mid-08, PCCW's attributable interests should amount to HK$7.2 billion after including the outstanding convertible bond of HK$2.42 billion owed by PCPD.

However, the SOTP valuation for PCCW includes only HK$5.3 billion for its interests in PCPD, implying a shortfall of HK$1.9 billion or HK$0.28/share for PCCW.

Without the valuation shortfall, the offer price for PCCW virtually offers no premium to the SOTP valuation.

Attempts to undermine minority shareholders' interest will be in vain after the failure of the HK$2.85/share privatization offer in March.

In fact, there is only a 5 percent free float in the stock as institutional interests amount to 33.5 percent.

We maintain our target price at HK$3.6, which is equivalent to a fair discount to our conservatively estimated fullydiluted NAV (net asset value) of HK$4/share.

Taifook Research Limited and/or its group company(ies) have staff or officer serving as an officer of the listed corporation herein covered.

The author is an analyst with Taifook Securities.

(HK Edition 12/17/2008 page3)