HL Asia

HL Asia: CIMB upgrades to Neutral from Underperform as its valuations are near global financial crisis troughs after its recent retreat. "But pending evidence of mgt's success in turning around the group, it is difficult to envisage further upgrades." CIMB cuts its target to $1.60 from $1.66 after trimming its FY11 estimate on further losses at fridge-making unit Xinfei and after applying a bigger valuation discount to engine-making unit Yuchai. It notes new mgt rolled out a slew of initiatives to return Xinfei to profitability; "we are heartened but do not think there will be a quick fix. Xinfei's deteriorating competitive position, higher unit costs and the expiry of rural subsidies in three key Chinese cities (40% of sales) compound the uphill task." CIMB expects Yuchai's diesel engine sales to remain sluggish in FY12; it notes the unit contributes about half of HLA's earnings, but views it as unlikely to offset Xinfei's losses. The stock is down 1.3% at $1.50.