Hongguo (Report from UOB Kay Hian)

Hongguo Intl gains on attractive valuation China-based shoemaker Hongguo International Ltd edged higher due to its attractive valuation compared to peers, dealers said. Hongguo rose 0.015 sgd or 3.26 pct to 0.475 on volume of 11.20 mln shares. In a recent note, DBS Equity Research said that Hongguo's valuation is attractive with a price-to-earnings ratio of 9.9 times prospective 2006 earnings, compared to its closest listed peer China Hongxing's PE ratio of 12. 4 times. DBS said that Hongguo's pretax margin at 19.4 pct was also higher than China Hongxing's 14.9 pct. "We believe that Hongguo should trade at a closer valuation towards its listed peers in Hong Kong and Singapore," the brokerage said. DBS has a "buy" rating on Hongguo with a target price of 0.59 sgd.