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CyberQuote HK

VIEWS: 6 PAGES: 6

									                        輝立証券(香港)有限公司
                        PHILLIP SECURITIES (HK) LTD.
                        EXCHANGE PARTICIPANT OF THE STOCK EXCHANGE OF HONG KONG LTD.




Dealer’s Commentary (24 April 2012) – Jonathan Chiu

LEE & MAN CHEMICAL CO. LTD

       Company Name                           Lee & Man Chemical Co. Ltd
       Stock Code                             746
       Recommendation:                        Buy
       Buy in Price                           $6.20 HKD
       1st Target Price                       $7.07 HKD
       12 month target:                       $10.08 HKD
       1st Cut Loss Price                     $5.50 HKD
       Market Cap.:                           $5.346 billion HKD
       Share I/S:                             825 million
       52 weekly:
       Highest:                               $10.73 HKD
       Lowest:                                $3.44 HKD
       P/E (trailing) as of Apr.20 2012       7.96
       P/B as of Apr.20 2012                  3.14
       Date                                   Apr. 24 2012
       Written by                             Jonathan Chiu

Summary

I would recommend a buy rating on Lee & Man Chemical Co Ltd as of Apr. 24 2012 based
on my analysis using technical and fundamental analysis. The stock has been trading
around 4.41 HKD in Jan 2011, and currently there has a been a strong uptrend the stock is
trading at 6.48 HKD as of Apr. 20 2012 although volume is low. Buy-in price at 6.20 HKD,
1st target price at 7.07 HKD, cut loss price at 5.50 HKD, and 12 month target price at
10.08HKD.

Lee & Man Chemical Ltd's has been robust and improving it's business operations and
productivity capacity since end of Dec 2009; as of year end of Dec 2011 Lee & Man
Chemical Ltd has achieved record high in revenue and net profit: 1.808 billion HKD and
637 million HKD; respectively. End of 2011, Lee & Man Chemical's net profits has gained
+390% since 2009.

As of December 31, 2011, the quick ratio is 3.5917 improved substantial by +328.21%
compared in 2010 the quick ratio was only 0.8470. The total debt ratio is 41.46%,
improved slighty by +0.033% from 0.40129 previous in 2010. And as of December 31,
2011 the company's net profit margin was 37.40%, return on assets was 23.86%, and
return on equity was 40.77% which is considered high.

Company profile

Lee & Man Holdings started manufacturing and selling in the handbag business and slowly
invested more capital resources in the chemical business now known as Lee & Man
                         輝立証券(香港)有限公司
                         PHILLIP SECURITIES (HK) LTD.
                         EXCHANGE PARTICIPANT OF THE STOCK EXCHANGE OF HONG KONG LTD.


Chemical Co Ltd. The company was founded by the Chairman Ms. Wai Siu Kee.               She
has more than 46 years in the manufacturing industry.

On June 27, 2011, Lee & Man Group spun off its handbag business and has listed on the
Main Board of the Hong Kong Stock Exchange under Lee & Man Handbags (Stock code
1488) by way of introduction. On October 18, 2011, the renamed the company was
effectively changed from Lee & Man Holding Limited to Lee & Man Chemical Company
Limited. The spin off of the handbag business enables the management team to focus
mainly on the development of the chemical business. The management team believes
this allows the investors more transparency and clearer operations, and financial positions
in the chemical business.

Lee & Man Chemical’s main business focuses on chemical products including
chloromethanes, hydrogen peroxide and caustic soda in production since end of 2008.
Lee & Man Chemical owns 100% of Lee & Man Company Ltd, Guangdong Lee & Man
Chemical R & D Ltd, and Jiangsu Lee & Man Chemical Ltd. End of Dec 2011, the
company employs more than 700 staff.

Lee & Man Chemical’s main sales is from producing Chloromethane products Caustic
soda, and Hydrogen peroxide representing 58.8%, 32.18%, and 6.48% of its sales;
respectively.

The company’s annual production from the Jiangsu Chemical Plant has reached 160,000
tons of chloromethane, 220,000 dry tons of caustic soda and 120,000 tons of hydrogen
peroxide in 2011.

Lee & Man Chemical’s majority of customers resides in China with 99%, and the remaining
1% resides in the U.S.

Financial Analysis

Lee & Man Chemical business recorded $1.808 billion HKD increase by 40.7% and net
profit increase by $637 million HKD increase by 77.9% over the same period last year
(Appendix A). It’s annual gross profit margin has increased from 44.7% to 46.7%, and net
profit margin also increased from 27.9% to 35.2%. In addition, Lee & Man Chemical's net
profits has gained +390% since 2009.

Last year, the hangbag business now listed as L& M Handbag (Stock code 1488) recorded
$347 million and net profit of $39 million where it spun off it’s listing.

As of Dec 2011, total assets increased by +30.57%, from 2.17 billion HKD in 2010 to 2.833
billion HKD in 2011. And total liabilities had decreased by -8.7% year on year, from
870.86 million HKD in 2010 to 795.06 million HKD in 2011 (Appendix B).

At the same time, Lee & Man Chemical has a very strong cash reserve waiting for
business opportunities and future expansions. End of Dec 2011 net cash flow of 1.233
billion HKD from 393, 385 million HKD an increase of 213% from the previous year. End
of this year, the company retention of the remaining profit for the year of $437 million HKD.
                        輝立証券(香港)有限公司
                        PHILLIP SECURITIES (HK) LTD.
                        EXCHANGE PARTICIPANT OF THE STOCK EXCHANGE OF HONG KONG LTD.


With the strong cash reserves I believe the company can withstand the headwinds and
turbulence in the current economy from the posing debt problems in the U.S. and in the
European countries. As the management team at Lee & Man Chemical has pointed out
with the strong annual profit performance last year they are waiting for potential business
opportunities and for future expansions in the chemical business (Annual Report 2011).


Appendix




Appendix A: Income Statement (Annual Report 2011)
                     輝立証券(香港)有限公司
                     PHILLIP SECURITIES (HK) LTD.
                     EXCHANGE PARTICIPANT OF THE STOCK EXCHANGE OF HONG KONG LTD.




Appendix B: Balance Sheet (Annual Report 2011)
                    輝立証券(香港)有限公司
                    PHILLIP SECURITIES (HK) LTD.
                    EXCHANGE PARTICIPANT OF THE STOCK EXCHANGE OF HONG KONG LTD.




Appendix C: Cash Flow Statement (Annual Report 2011)
                       輝立証券(香港)有限公司
                       PHILLIP SECURITIES (HK) LTD.
                       EXCHANGE PARTICIPANT OF THE STOCK EXCHANGE OF HONG KONG LTD.




Source:   http://www.leemanchemical.com/index_en.html, aastock

I, Jonathan Chun Yip Chiu, am a licensed person under the Securities and Futures
Commission. Until the date this commentary was published, neither I and/or my affiliates
are the beneficiary of the securities mentioned herein or are entitled to any financial
interests in relation thereto.

								
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