Thursday, September 29, 2011

China Minzhong

China Minzhong: CIMB maintains O/p. House see value emerging from MinZhong’s 31% decline since Dec 10, led by broader concerns over S-chips’ corporate governance. At 3.6x CY11 P/E and 0.8x P/BV, grp offers good value, and house believe, considering its defensive earnings in this economic climate as well as earnings momentum.

Resume coverage with new earnings forecasts, an unchanged Outperform rating and a $1.22 TP based on 4.8x CY12 P/E, or a 33 % premium to the FTSE ST China Index. Anticipate stock catalysts from continued strong quarterly results and a switch to a Big-4 auditor by FY13.

We caution however that stock’s larger peer ‘Chaoda’ whose shares were suspended on Sept. 26 after slumping 27%, is going through a HK’s Market Misconduct Tribunal Court hearing, where the panel hears civil cases involving six offenses: including price rigging, false trading, insider trading, disclosure of information about prohibited transactions, disclosure of false information inducing transactions, and stock market manipulation.

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