Dream (1126.HK), AMVIG (2300.HK), HuaFeng (364.HK)

After reviewing the interim results of Sewco (209.HK), I have revised downwards my sales expectation for Dream Int'l (1126.HK) in 2009. On the other hand, Sewco's gross margin was much better than I expected (i.e. rose from 5% in 1H'2008 to 15% in 1H'2009). Sales decline and margin expansion should offset each other to a large extent for the bottom line. Overall, my expectation for Dream Int'l remains the same. Dream Int'l will have a great year in 2009.

Two new stock ideas I developed --

AMVIG (澳科, 2300.HK, $3.4 now)- stable cigarettes packaging industry, AMVIG is #1 market leader with 12% market share, stable margins, strong cash flow, net cash position (i.e. cash > debt) after recent disposal of an under-performing subsidiary. Stock price has been over-penalized these days. Target price is $4.8-$5.4, representing 12x of what I see as the normal, post-subsidiary disposal EPS of $0.40-$0.45. Big upside if the company pursues further business acquisitions or if there's a privatization / takeover bid (AMVIG would actually make a very good MBO/LBO candidate).

HuaFeng (華豐, 364.HK, $0.33 now) - reputable textile company, Huafeng has demonstrated resilience in earnings during economic downturn. EPS for 2009 is expected to be around $0.075 (excluding one-time gain of $0.06), representing 4.4x P/E. P/Book is 0.33x. Management has publicly said that there has been a pickup in orders since June 2009. Huafeng has net cash of $267m (vs. market cap of $409m) that should support generous dividends for next few years. Target price is $0.52-0.60, representing 7-8x (which is the normal, mid-cycle P/E range) of expected EPS in 2009, without giving any consideration to the net cash. Big upside if the management declares large special dividends.

I don't think I'll be able to come up with any more new stock ideas for next two months (it's a very time-consuming process), but I'll *try* to post weekly on this blog for updates about companies that I have recommended and/or other general market observations and/or interesting research reports that I come across (e.g. the JPMorgan one).