OCBC Report - 25 March 2008

Jishan Holdings Ltd: Challenging environment

Summary: Jishan Holdings Ltd could potentially face slowing export demand and the strengthening RMB, which may lead to reduced export revenues and margins compression in the domestic market.

China’s textile and garments exports in February declined 32.9% from January due to lower global demand. Jishan’s export sales accounted for 43.1% of FY07 revenue, and any slowdown in export demand could affect its export revenues.

With the strengthening of the RMB against the USD, this may also reduce Jishan’s export competitiveness, thereby reducing export revenues. Moreover, a slowdown in exports may lead to an increase in supply to the domestic market, resulting in a reduction in average selling prices, thereby compressing margins.

In view of the above challenging operating environment, we are reiterating our HOLD rating and fair value of S$0.08. (Selena Leong)

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NEWS HEADLINES

- JPMorgan Chase & Co has increased its offer for Bear Stearns to US$10 a share.
- Singapore’s inflation rose 6.5% YoY in February, just shy of the 25-year high of 6.6% reported in January as the cost of housing, food, transport and communication increased. The Ministry of Trade and Industry issued a second statement in two months saying that underlying inflation remains stable.
- Property consultancy firm Knight Frank expects home, retail and office rental growth to ease. Private housing rents are expected to grow 5-15% YoY in 2008, after a massive 40% YoY gain last year.
- China Energy expects its Jiutai acquisition, the subject of an independent review, to pay off in three years and to enjoy a turnaround in profitability this fiscal year.
- Private equity firm MBK Partners has extended a deadline for its bid to take AsiaPharm private at S$0.725 a share by a week until March 31. MBK has so far received acceptances representing 28.53% of the total issued share capital.
- Boustead has been awarded two contracts worth S$32m to build water and wastewater treatment plants for mega power plants in Indonesia and Singapore.
- Midas has won a RMB61.9m contract to supply aluminum alloy extrusion profiles for metro train cars on the Shanghai Metro Line 10 project.
- STATS ChipPAC said it will end over-the-counter trading of its American depositary receipts “as soon as practicable”.