HL Asia: Phillips initiates at Hold with $3.62 TP, based on SOTP valuations, translating to 10x FY11E P/E, a 20% discount to its 5-year historical 12.5X P/E. Note that outlook for 4Q10 remains rather challenging, adviseing investors to stay on sidelines….
Outlook bleak due to additional marketing expenses in bid to boost sales at Xinfei, sales of refrigerators will be impacted by winter months, stiff competition, increased raw material costs & higher wages in China….
Add that demand for building materials will be highly dependent on weather conditions. However, on a brighter note, broker still very bullish on the prospects of China Yuchai which will benefit strongly from the strong recovery of industrial production and record automobile sales in China. Tips various JVs to start commercial production in FY11 which will contribute positively to HLA''s earnings.