Hong Kong: UBS stays neutral on Tsingtao Brewery

UBS stays neutral on Tsingtao Brewery, Dow Jones & Company, Inc. posted on January 16. Notes its 13% market share in China, prominent brand have not translated into reasonable profitability; in past 6 years, has bought about 50 local brands but a third still loss-making;

"We think the operating environment is likely to remain difficult in the foreseeable future," says UBS. Adds, company still state-owned enterprise, so subject to various constraints; also, sector very competitive due to large number of SOE breweries, distribution expenses likely to keep rising. Targets stock at HK$8.50 (based on 7.3X 2006E EV/EBITDA, the sector average); shares flat at HK$8.75.

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