Thursday, November 23, 2006

Stock Upgraded: China Dairy upgraded from fully valued to hold by DBS Vickers

DBS Vickers Securities has upgraded its call on China Dairy Group Ltd to "hold" from "fully-valued" and raised its 12-month target price to 0.59 sgd from 0.55 on the back of an expected increase in demand for dairy products. "According to global management consulting firm, McKinsey & Co, sales of dairy products are projected to almost double to 19.6 bln usd in 2010 from 10 bln in 2005," DBS said in client note. "With strong presence in its home market Shaanxi province, and its current focus on building up its presence in neighbouring provinces such as Henan, Shanxi and Gansu, we believe the group would be able to ride on the dairy market boom," it added. DBS also believes that while the company's shares are trading at a discount to its peers, the current disparity is harsh. "We see a stark contrast and believe a 25-40 pct discount would be more applicable, given the overall market growth potential and China Dairy's regional presence," it said. At 2.22 pm, China Dairy was up 0.01 sgd or 1.77 pct at 0.575 with 1.29 mln shares traded.

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