China: DBS Vickers reduced the Kingway Brewery earnings estimates

DBS Vickers cut the Kingway Brewery earnings estimates for 2005 and the 2006 by 4 % citing the company's 'lower-than-expected' margin for the first half to June, AFX reported on September 20. The company reported 15 % year-on-year growth in its six months net profit to 80.6 million hkd, or 8 % below DBS's forecast.

DBS reduced its net profit forecast for Kingway for this year to 195 mln hkd and for 2006 to 223 mln hkd. It did not say what its previous estimates were. 'While this is slightly disappointing, the company's performance is still one of the best among its peers,' it said. It retained its 'buy' call and target price of 3.20 hkd.

It said Kingway's growth 'will continue to be mainly driven by top line, as it continues to expand its capacity.' It said the key concern about the company's operation going forward is its ability to manage its expansion beyond Guangdong.

'However, with more capacity, this also means a better potential to do contract brewing for Heineken, an option which was not available before, due to capacity constraint.' Heineken has a 21.44 % stake in Kingway.