YHI International hitches ride on China growth
(2003-12-04)

YHI International hitches ride on China growth

ONE stock that's riding on the China growth story is tyre and wheel maker YHI International.

It has risen strongly this year and hit a high of $1.32 last month. But it has retraced slightly since then and closed at $1.20 yesterday.

This is a company with strong growth prospects arising from its exposure to China's burgeoning auto market.

It has been the main distributor of Yokohama tyres in China since 1974. It also sells alloy wheels, which it makes at its Shanghai plant.

China is one of the world's fastest-growing car markets. It is expected to be the world's third biggest auto market by the end of this year, with leading global car makers boosting operations there.

YHI is expanding its China operations to capitalise on this growth. It announced that it will raise $16 million via a share placement to fund this expansion.

Not surprisingly, analysts are upbeat on the company's prospects.

In a report two weeks ago, GK Goh pegged the stock's fair value at $1.30. And DMG & Partners, in a Nov 20 report, issued a 12-month target of $1.70.

Analysts concede that at around 17 times earnings, the stock is not particularly cheap.

But historical price-earnings don't matter as much for a growth stock.

If analysts' expectation of earnings growth are any indication, the price-earnings multiple will fall to more reasonable levels. GK Goh has FY03 estimated earnings at $14.3 million, while DMG has $14.9 million. FY04 is expected to see earnings of $17-$19 million, rising to $22-$24 million in FY05.

  
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