YHI may be innocent victim of China sell-off
(2004-05-21)

YHI may be innocent victim of China sell-off


THE market is witnessing an interesting phenomenon - good earnings are being brushed off as inconsequential and, in some cases, actually leads to a sell-off of the stock concerned.

This is a reversal of the pattern last year, when everyone fell over themselves to buy stocks with superior earnings and when analyst reports were worth their weight in gold.

Still, a good company is a good company, even if its shares get penalised after the company reports solid earnings. Such is the case with tyre maker YHI International, which recently reported a 45 per cent increase in first quarter profit to $4.2 million.

At $1.08, local broker GK Goh rated the counter a 'buy' in a May 17 report, setting a fair value of $1.48. 'YHI is on track to achieve our full-year best profit forecast of $19 million,' said GK Goh, adding that the shares have been unfairly driven down in the recent China-related sell-off.

DBS-Vickers has a similar view, stating in a May 17 report that it has a one-year price target of $1.73. It said the stock at $1.08 was trading at an undemanding 12.2 times FY04 and 9.4 times FY05 earnings, and fears of a China slowdown affecting YHI are unwarranted since more than 95 per cent of the company's production is exported.

A third broker, DMG & Partners, rates the stock at $1.66. It said - also in a May 17 report - that YHI's management expects the good performance to continue and that additional business opportunities will be realised in the second half.

YHI's shares yesterday lost four cents, closing at $1.02.

  
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