Merrill initiates Chia Hsin coverage with "buy"

Merrill Lynch on Wednesday initiated coverage of Taiwan’s third largest cement maker Chia Hsin Cement Corp with a "buy" recommendation saying it was leveraged to growth opportunities in the booming Chinese mainland.  "Chia Hsin’s production and expansion is expected to catch the wave of rising opportunity in China....We believe Chia Hsin is undervalued," said Merrill Lynch analyst Nick Lai in a research report.  The bank said a surging demand for high-grade cement is unlikely to be resolved over the next two years while cement prices should remain buoyant thanks to supply shortage and electric power constraints.

Merrill sees a 27 percent upside potential for the company’s shares and set a price objective of T$28.  It forecasts Chia Hsin will post a net profit of T$661 in 2003 compared to T$364 million in 2002, with rising profit contribution from China a key factor.   It was listed in Hong Kong last December and reported an 85.4 per cent jump in annual net profits to US$19.02m earlier this week.