Li Heng Chemical Fibre downgraded to hold with target price $0.31

Li Heng Chemical Fibre had issued a profit-guidance in respect of the results for FY08, which will be released on 27 Feb, 2009. The Group is expected to incur a loss for 4Q2008 (quarter-ended Dec-08) due to declining operating profits and the unrealized translation loss of its SGD bank deposits, mainly attributable to a depreciating SGD against the RMB.

We had downgraded LHCF to a Hold on 18 December 2008 at a target price of $0.31.

Operationally, we had already expected the Group to turn in single-digit margins in 4Q08 due to the rapidly declining ASPs of its nylon products during the last quarter of 2008. We maintain our full year net profit forecast for FY08 at RMB848.5m, although the actual full year net profit may miss our estimate marginally by 3-5% due to the unrealized translation losses. With the stock currently trading at 3.2x forward PER and with a net cash position of 23 S cts as at Sep-08, we are still maintaining our Hold recommendation.

Sponsored Links