HL Asia

HL Asia: Group has exposure into China's industrial space through its 34.9% owned China Yuchai International, which owns 76.4% of Guangxi Yuchai Machinery Company. Guangxi Yuchai would be launching 12 new engines for 2013, in compliance with the engine emission regulations. On the machinery sector, Komatsu CEO is hopeful about sales this year, aided by stimulus spending; Caterpillar mgmt expects demand in China to grow, partially aided by the JPY's weakness. Retail sales of construction equipment in China has been weak for the past 7-quarters, in correlation with the Country's GDP deceleration. Following recent reports stating China banks lending has been robust in January 2013, mostly attributed from infrastructure projects. Guangxi Yuchai Machinery engages in manufacturing, assembling and sale of light-duty, medium-sized and heavy-duty diesel engines for construction equipment, trucks, buses and cars in China. Group also produces diesel power generators primarily used in the construction and mining industries. Group serves as a distributor direct to OEMs and retailers. Company is currently trading at 26x P/E, and forward P/E of 12.5x; P/B of 0.8x. Share price has risen 6% YTD, marginal relative to the other counters with China exposure.