Apart from the effect on 股價 in the short term due to the sale pressure to take profit, there are the dilution to EPS but the increase of NAV. EPS & NAV may also affect 股價 in the long term. But it is hard to tell the end result. Anyway the rights for issuance of new shares will occupy a small percentage (less than 1.12%=1,205,000/1,077,050,000)of its enlarged capital. Therefore I do NOT worry too much.
The growth of China’s middle class, coupled with resulting domestic
consumption, is driving demand for higher living standards in China. As a
result, consumers are forecast to increase spending on household fixtures and
Pan-China urbanization provides immense growth potential for Bathroom
Master products (Bathroom Master is a unit that provides heating lighting
ventilation and exhaust fans);
Rapid Chinese housing development in turn results in strong growth in demand
for bathroom roofs and related products;
As the inventor of the Bathroom Master concept Aupu has 65% market share
when measured by industry turnover;
Technological and IP advantage – the company has over 144 patents and
strong technological expertise, particularly in infrared bulb heating.
FY2010 results due in 1Q11 – we expect turnover of RMB600mn and net profit of
RMB95mn (up 3.5% YoY);
High cash level (23% of market cap) raises the possibility of a special dividend.
We expect final dividend to increase to HK8 cents/share in 2010 from HK7
cents/share in 2009 (adjusted for 1 for 2 bonus shares announced on 25 August
New products and new promotions: Aupu is cooperating with European
designers in terms of promoting Bathroom Master and bathroom roof products
to Chinese middle-class customers;
Valuations & comparables
We rate the stock a BUY and set our target price at HK$1.72 based on a P/E
multiple of 14x FY11E earnings representing a 15% upside (and a 5.6% dividend yield)