HONG KONG: Kingway Brewery rating held by broker

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DBS Vickers has kept its "hold" rating on Kingway Brewery. The broker has a 12-month price target of HK$2.40 on the Hong Kong-listed brewer, formerly known as Guangdong Brewery Holdings, on hopes of strong sales momentum and margin for this year and 2005.

DBS has revised its earnings forecast for the company in 2004 and 2005 upwards by between 6% and 13%, citing Kingway's higher efficiency compared with other brewing companies on the Chinese mainland.

DBS also expects the company's full-year 2004 sales to grow by 29% year-on-year.

"Better utilisation of existing capacity and improvement in sourcing should help offset the impact of higher raw material costs, with EBIT margin expected to expand from 19.8% in full year 2003 to 21.5% in full year 2005," it said. The broker said that the company is expected to benefit from its cooperation with Heineken.

"The company has already started a joint distribution effort with Heineken, though on a small scale. While we do not expect any impact in the near term, the move bodes well for future co-operation between the two parties. Contract manufacturing remains a possibility in the long run," it noted.

DBS expects earnings to grow at a compound annual growth rate of 29% between 2003 and 2005.

Sectors: Beer & cider

Companies: Heineken

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