OCBC Report - 04 Dec 2007

Man Wah Holdings Ltd: Cheers to China's housing boom

Summary: We visited Man Wah Holdings Ltd's (MWH) plant in Huizhou Daya, PRC last week. It has completed the construction of its phase 2 capacity expansions, which are expected to be operational in Dec 2007. This is timely to support MWH's strategy of growing its China business. MWH's PRC sales grew 142.6% in 1H08, and it plans to grow this segment by setting up more Cheers stores and growing its same store sales. MWH is also on the lookout for potential acquisitions of smaller furniture manufacturers in the Shanghai region to enhance its efficiency in penetrating the central and northern regions of the PRC. The housing boom in China, coupled with expected margin improvements arising from economies of scale from its enlarged capacity, put MWH on track for continued growth. We maintain our FY08 revenue and net profit forecasts of HK$1.4b (+64.1% YoY) and HK$164.4m (+81.2% YoY), respectively. Our fair value estimate remains at S$0.99, pegged at 9x blended FY08/09 PER. Maintain BUY. (Lee Wen Ching)

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NEWS HEADLINES

• Keppel Corporation's wholly owned subsidiary Keppel Offshore & Marine Limited celebrated its fifth anniversary with the unveiling of Keppel Offshore & Marine Technology Centre - an S$150m R & D centre, and an order book of over S$13b.
• China Energy Ltd plans to triple its Methanol production capacity by end-2008 from 250,000 metric tons per annum (mtpa) to 750,000 mtpa, bringing total capex to US$443m.
• Genting International has taken a 9.4% stake in the Rank Group, a UK-based casino and Mecca bingo firm.
• Singapore Exchange Limited has strengthened its technology efforts with two key appointments for its operations & technology group.
• The Monetary Authority of Singapore has warned local banks of key short term risks to their profitability, stemming from a spike in volatility of financial asset prices or a sharp US economic slowdown.
• GuocoLand Ltd has completed the en-bloc acquisition of Leedon Heights for S$835m.
• KTL Global (rigging equipment provider), Soon Lian Holdings (aluminium alloy products supplier) and First Resources (crude palm oil producer) are set to launch their IPOs amid volatile market conditions.