Sell Side & Buy Side Research

I received the following article from Singapore on sell side and buy side analysts. At the end I have added a posting on the same topic.

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Fund managers value honest and independent analyst reports that offer a different viewpoint. But they feel that such reports are few and far between.
Of course, underscoring that assessment is what they perceive to be a potential conflict of interest between sell-side research and stockbroking arms housed within a brokerage firm.



One fund manager who declined to be named says that 'sell' calls are as important to him as 'buy' calls. But he feels that very often, some brokers tend to issue only 'buy' calls and no 'sell' calls.

'I still see many reports which are done for marketing purposes. That is, they are written to get new businesses rather than present the true picture of the targeted companies,' he adds. 'There is still a lack of real independent research out there.'
The fund manager, who is with an Australian private equity firm, says that he values regular, continual coverage on stocks rather than 'ad-hoc' coverage.

One criticism about the industry has been a lack of research continuity for underperforming stocks where 'sell' calls are warranted, as it is the 'buy' calls that drive equity team sales at these brokerages.

A case in point is OSIM International, which was a magnet for analysts in its early years of sterling growth. But after it started reporting losses following its acquisition of US retailer Brookstone in 2005, analysts stopped covering the stock. Coverage of the stock has returned recently after OSIM staged a turnaround in earnings by writing off its Brookstone investment last year.



'These days, the large financial institutions have underwriting, proprietary trading and stock-broking businesses. Which is a larger profit centre?' asks Wong Kok Hoi, chairman and chief investment officer of APS Asset Management. 'They say they have China walls but frankly I am not sure how thick the walls are.'

But on balance, the unwillingness of users to pay for the research also has a part to play for the quality of sell-side research, Mr Wong adds. On a positive note, he believes that sell-side research has improved over the years.

Fund managers typically have large in-house research teams to meet specific research needs. The difference between sell-side research and buy-side research is who pays for them.

Sell-side research is often funded by the stockbroking business and its recommendations are directed across the general mass of the brokerage clients.
Buy-side research is paid for by the funds' clients, and recommendations are based on how well the investment meets the fund's investment strategy and portfolio.

Fund managers say they generally use sell-side research to gain new insights or investment ideas, obtain a third-party view, or to know more about new companies.

Hugh Young, managing director of Aberdeen Asset Management Asia, says he typically seeks out sell-side research for specific industry expertise that Aberdeen does not possess in-house. But he laments that there has been much rehash in research reports on what company management says.

'It's useful for people who don't have time to read the full management report. We do a lot of research in-house, so we can only blame ourselves when we get things wrong.'

Since short-term estimates or assumptions of the analysts are quickly priced into the market before fund managers could act on them profitably, fund managers often look out for the long-term views of the analysts.




'As long-term investors, we naturally would like to know the intrinsic value of a company,' Mr Wong says. 'Hence, we appreciate analysts' work on the long-term value of a company which, among others, must at least include long-term growth prospects of the industry and the company business franchise, including its durability.

'We also like to know what they think of the integrity and competence of management and appreciate those who can help flesh out the quirks among the fine print in the annual accounts,' he adds.

'We have always found it productive to speak with analysts who know management well, truly understand the business franchise's strengths and limitations, the company's competitors, etc.'

Sunday, August 09, 2009

Buy Side Vs Sell Side Analysts

For those not in the industry, the terminologies may be confusing. Buy side analysts refer to the analysts working within a fund management firm, generating reports, analysis and recommendation for their own portfolio managers or strategy sessions. Sell side analysts are those at brokerages trying to generate ideas on buys and sells to clients.



An example of a buy side analysts team (and its a big team) locally would be the analysts at Public Mutual. These recommendations by buy side analysts, made exclusively for the benefit of the fund that pays for them, are not available to anyone outside the fund. If a fund employs a good analyst, it does not want competing funds to have access to the same advice. A buy-side analyst's success or talent is gauged by the number of profitable recommendations he or she makes to the fund. In most cases, top buy side analysts end up as their in-house fund managers. This is usually why many of the traditional fund mangers positions are not advertised - they have instituted a hoard of analysts clamoring for those positions.

The buy-side differs from the sell-side in three main ways: they follow more stocks (30-40), they write very brief reports (generally one or two pages), and their research is only distributed to the fund's managers.

Buy-side analysts can cover more stocks than sell-side analysts because they have access to all the sell-side research. They also have the opportunity to attend industry conferences, hosted by sell-side firms. During these conferences, the managements of several companies in a sector present why they are a better investment. After gathering this information, buy-side analysts summarize their case in a brief report that also contains an earnings forecast. These reports are only distributed to the fund's managers.



The sell-side provides research and conferences to the buy-side in the hope that the buy-side will let them execute the large trades that the funds make when they act on the recommendation provided by the sell-side. Having access to the sell-side's primary research and the ability to attend industry conferences allows the buy-side analyst to follow many more stocks than a sell-side analyst. To compensate the firm for this information, the funds will buy and sell stocks with the brokerage firms that provide the best information.

You would think that a buy side analyst recommendation would perform better than a sell side because the former only has to please one client, while the latter may be "forced" to generate new ideas or do flip-flops in order to generate trades / commissions. The buy side is paid by the fund management house itself, hence just one client to please or piss off. The sell side is paid by the brokers, which means you can be praised or pilloried or pile-driven by many clients of the firm.

In a 2008 study by Boris Groysberg, Paul Healy and Craig Chapman for the CFA Institute in the Financial Analysts Journal Vol. 64, they looked at buy-side and sell-side earnings forecasts from 1997-2004. The conclusion was that buy-side analysts made more optimistic and less accurate forecasts than their counterparts on the sell-side. The performance differences appear to be partially explained by the buy-side firm's greater retention of poorly performing analysts and by differences in the performance benchmarks used to evaluate buy-side and sell-side analysts.

In a new study by professors from Harvard Business School and the University of North Carolina, they found that shares chosen by sell-side analysts performed more than 3x better than those selected by the buy-side analysts (1997-2004 as well). The findings are a surprise because buy-side forecasters have none of the conflicts with investment banking units like the sell-side.

A probable explanation is that sell-side research is published while buy-side is not. The fact that it circulates spurs competition, comparisons, scrutiny, and maybe even get recognised when "best of awards" come around. It is also fair to assume that buy-side analysts have a much much less of a chance to be fired, retrenched or replaced than sell-side, and for that reason as well sell-side analysts make much more money.

The results were culled from over 12,000 analysts at brokerages and 340 buy-side institutions. Buy-side "buy calls" generate an annual market adjusted return of 2.3% while sell-siders generate an 8.1% return average. This would really beg the question why fund management firms would continue to fund these buy-side research? One main benefit is to cover those stocks that generally do not appear on the radar of the sell-side analysts. Sell-siders can only reasonably cover big stocks as those are the ones that generate the commissions. Buy-side may need to discover more of the smaller companies.



In my view, the sell-side analysts will always know the companies and the senior management of the companies covered better than the buy-side analysts. Now that there is a stricter and hardier Chinese wall between research / sales / investment banking, it will make sell-side research have a bit more integrity and reliability.

Passing Commentary On Biz Issues

SC & Mudajaya - Is there a better way to do this? The volatility in the share price is so disturbing. SC had to act after getting "the letter". Here, all listed company owners and CEOs would be shuddering, will SC act on any kind of poison letters? It is highly discretionary, if its not, everyone should get the set of rules out in the open.



If I was an unscrupulous trader or someone who wanted to get into a company on the cheap, this might be an excellent way. Say, I like to own a substantial stake cheaply in a good company, e.g. Evergreen or QL Resources ... and I just wrote the poison letter with minimal truth in it. Of course that will make me liable if I was caught. If I wasn't, I could very well collect a substantial amount of shares 30%-40% cheaper and at good volume as well.

Just the fact that SC has said that they are looking into allegations would kill the stock, because people will guess. Is there a better way? How do we justify between claims that are "reasonably truthful" or "reasonably sneaky"? We are already punishing the stock before the jury is back with a verdict. It cannot go higher, it can only go down.

Can we suspend the stock until the investigation is over? That is plausible, but is that OK for a stock to be suspended for an extended period of time? If it takes 2-3 weeks to come back with a finding, maybe that is the lesser evil.



We still do not know what the final outcome will be, but the entire episode gives a lot of room for excessive volatility and possibly even insider trading, by oh so many parties, be it good news, no news, bad news, etc... how do we guard against it?

I am not saying anyone is at fault but we should really try and get to do this in a "better way", I am sure there is a better way, even if it means suspending the stock indefinitely as the alternative is totally unappetizing and discriminatory to genuine investors.

We just cannot let the "bad guys" win at this.


Sime Darby - Sime said on Friday, Aug 6 that it would announce its fourth quarter results on Aug 26. It added that until then, it could not comment on the results of the group "except that we expect the company to report a profit for the year ended June 30, 2010 based on its best estimates".

Just because the rumours has it that you might be losing money, and in the billions ... still does not give the company the right to say that you will report a profit, or am I the only one who thinks that its not OK?

Best Country To Be Unemployed In

European governments offer the highest percentage of combined unemployment pay and state benefits, while the U.S. provides the least generous compensation to dismissed workers. The percentages cited are of their normal monthly pay packets.

Norway

* Unemployment rate: 3.3%

** Unemployment benefit in first year: 72%

Benefit after 12 months: 72%

Spain

* Unemployment rate: 19%

** Unemployment benefit in first year: 69%

Benefit after 12 months: 65%

France

* Unemployment rate: 10.1%

** Unemployment benefit in first year: 67%

Benefit after 12 months: 64%

Germany

* Unemployment rate: 7.5%

** Unemployment benefit in first year: 64%

Benefit after 12 months: 48%

Canada

* Unemployment rate: 8.2%

** Unemployment benefit in first year: 52%

Benefit after 12 months: 14%

Turkey

* Unemployment rate: 14.5%

** Unemployment benefit in first year: 46%

Benefit after 12 months: 0

Japan

* Unemployment rate: 4.9%

** Unemployment benefit in first year: 45%

Benefit after 12 months: 3%

South Korea

* Unemployment rate: 4.4%

** Unemployment benefit in first year: 31%

Benefit after 12 months: 0

U.K.

* Unemployment rate: 8%

** Unemployment benefit in first year: 28%

Benefit after 12 months: 28%

U.S.

* Unemployment rate: 9.7%

** Unemployment benefit in first year: 28%

Benefit after 12 months: 0

* February 2010

** Percent of annual income

Data: Organization for Economic Cooperation & Development, U.K. Office of National Statistics, Turkey's Statistical Board

I think Spain and France are fantastic places to be unemployed, don't you think so? I have written before that Asian countries seem to have an unhealthy abhorrence towards unemployment benefits. We tend to have very few safety nets, and when an economy plunges into a deep recession, maybe at no fault to the general working public, many have no safety nets to fall on. We get ourselves into perilous situations.

What I am asking for is not a fully funded government unemployment scheme, but rather an unemployment insurance scheme, which will cost the government next to nothing if done properly. For the benefit of those who missed out, here is a repost of my article:

Wednesday, February 11, 2009

Malaysia Needs Unemployment Insurance

Our government has been postponing the need for unemployment insurance for too long. We do not have sufficient safety nets underpinning our country's social and economic systems. The concern has always been the cost side. The other argument is the incentive not to work. There is a bigger danger in having unemployment insurance - companies may be more "willing" to bite the bullet to lay off workers in such an environment.

We already have too many archaic rules pervading the economic life of Malaysians. Its quite debilitating really. We have no unemployment insurance, and every 7-10 years we will have a massive recession and many might not be able to honour their commitments owing to forces greater than them.

We can take the pedestal and say they deserve it for not being able to manage their financial affairs properly, but seriously, even drug addicts and prisoners get a second chance to rebuild their lives. I am not here to justify reckless behaviour, but to ask that the laws be fairer to the normal person. When you unfairly penalises a person, it does not just affect the person alone, in Malaysia's culture, people also have to take care of their parents and extended families. Hence the social impact is substantial.

I am not an insurance guy, but I think we can come up with a semi government body to do this, or even be part of EPF to do this. EPF can do this role well as it already has the database for checks and balances.

How about all employees contribute 1.5% to this Fund and the employer puts in another matching 1.5% of salary. Only employees who have contributed more than 1 year will be able to enjoy the benefits. If you are laid off, you will get 3 months full pay and 5 months of half pay of your last salary. These will be paid like normal salaries on a monthly basis, thus covering most expenses for at least 8 months. This will be in additional to the normal notice pay and severance pay. Once you have taken the unemployment benefits, you will need to be working for at least another year before being qualified to obtain the benefits again.



Like I said I am no actuary, but all things being equal, the monthly 3% to the fund basically means 1 person is covered for every 33 employees. All things being equal again, in a downturn the Fund should be more than able to carry a 300 basis point jump in unemployment (e.g. if unemployment rate jumps from 3.5% to 6.5%, technically speaking we are better equipped to deal with it). EPF has the database and will be able to verify when a person has found new employment. In any system there will be bad hats trying to find loopholes - heavy penalties should be meted out to discourage bad behaviour by employers and employees.

During good times, the Fund will be able to accumulate surpluses, thus covering the outflows during bad times. It is not meant to be a crutch but part of a developing structure for a developing nation, that seeks to minimise social costs, where we can grow and shoulder the good and bad together. Any major shortfall will be borne by the government, which won't be necessary if the calculations are made properly. Its not a crutch really because its NOT borne by the taxpayers but by the contributors to the insurance scheme. That 8 months of pay will be very important as many are shouldering mortgages that needs to be serviced - its not like, no job then can go back to kampung and stay with parents or live off the land. Let's be realistic.

Why I Like Notion VTec (Tons Of Catalysts, Another 3A?)

There are very few companies that can map out growth and expansion strategies properly, particularly if you manufacturing in precision engineering. You need to deliver, be consistent, be a critical part of the supply chain, and deliver well and on time. Then you need to manage your cost well and hope to reach critical mass in whatever you are producing. Track record alone will ensure more business from the big players. The big guys will always want to whittle down their main suppliers, and they need to feel comfortable that they are reliable and can deliver (again).

Just like Success Transformers, Hai-O and Efficient e-Solutions, Notion Vtec has also made the Forbes Asia "Best Under A Billion" list. The list featured the best 200 companies from the 24,155 listed companies in the Asia-Pacific region.

Over the last 2 weeks Notion V Tec has had a strong run up. Is it just participating in the "me-too" smaller caps rally, or is there something more substantial. Notion VTec is one of biggest high precision engineering specialists in Malaysia with 2 manufacturing plants in Klang, Selangor, which it has expanded a few times since its IPO in 2005. Presently, it has about 1,300 employees, and 80% of its factory workers are foreigners. The company has 960 CNC machines at the 2 production facilities. It has obtained ISO 9001: 2000, ISO140001: 2004 and ISO / TS16949 certification.

Notion VTec derives the bulk of its revenue from the hard disk drives (HDD) and digital camera industries. Its key customers are MNCs such as Western Digital, Hitachi and Nikon. Its key products camera cam barrels, digital camera body lens ring, HDD anti-disk, HDD disk clamps, HDD spacer rings and so on (refer to Appendix I for details on key products). Other industries with a lower sales contribution are the automotive, consumer electronics and air conditioning sectors.

Its top customers are the biggest players in the HDD and digital camera industries the likes of Western Digital, Hitachi and Nikon, as such, Notion VTec’s business will be reflective of the performance of the two industries. HDD division (44% of group’s revenue) is seeing continuous strong demand from its key customer namely Western Digital. Demand for storage has been very firm on the back of rising digitalization. Compare that to Seagate which is still mired the problems associated with the acquisition of Maxtor.

Camera (46% of group’s revenue) is also seeing uptick in demand. As price points moved lower (for the SLRs), demand elasticity kicked in with higher volume being experience in the SLRs space. Nikon being its major customer (which commands some 40% of global SLRs) is once again loading up Notion for its quality and strong execution.

Notion VTec is in the midst of finalizing the acquisition of a production facility (23,000 sq ft) for a sum of RM5m in Thailand. The new facility will gear up to produce camera components for its key customer – Nikon beginning 1QCY2010. Plans are afoot to expand the production floor space to 100,000 eventually.

Catalyst #1 - New 2.5inch form factor: The project will involve the supply of base plates with contribution likely to hit RM4m per month (ASP USD1.25 x 1m pieces per month) or RM48m per annum on proforma. Initial ramp will be circa 100,000 per month rising to 1m eventually (tentatively by June 2010). Previously concentrating only at the 3.5inch form factor, the new client offers a golden opportunity for the group to tap into the higher growth form factor which includes notebooks and other mobile devices. The new 2.5inch project should propel group to hit revenue of RM1 billion in the near future. Using 600m units HDD per annum as a reference and 5% market share for the group, number of units will work out to be 30m pieces, that will translate into additional earnings of RM60m or 8.5sen EPS. Considering it is making just RM36m in net profits now, that is a quantum leap.

Catalyst #2 - Notion VTec has just been qualified by a new HDD customer, Samsung, to produce 2.5” HDD components. This is one factor which would propel Notion VTec to a higher growth platform in FY10 and FY11. Without this qualification, the company would only at best grow organically in tandem with the industry’s growth rate. This qualification by Samsung allows Notion VTec to mass produce 2.5” HDD components for the first time. Before this project, 90% of its HDD components is for the 3.5” HDD segment. Samsung has ordered the company to start mass production on 2.5” HDD components by November. Notion VTec is the second supplier for this particular component.

Catalyst #3 - Margins defensability: While Notion VTec’s consistently high margins of 25% since FY04 is impressive, it also stands out as being able to turn in the highest margins among its public listed peers in Malaysia. Notion VTec’s high volume products such as disk clamps, anti-disk and spacers for HDD are very profitable as each clamp and spacer only weighs 2 to 5 grams respectively, and so its material content is limited to less than 25% of its cost. By making its tools and fixtures in-house also brings down costs further. As for the digital camera segment, since the company started supplying high volumes of cam barrels to Nikon in 2007 and other digital camera makers prior to Nikon, the pricing pressure has been mitigated by the continuous introduction of new camera models, which enables Notion VTec to price its components at better levels.

Revenue 104.5m (2007); 146m (2008); 165m (estd.); 214m (2010 estd.)
Net Profit 26.6m (2007); 32.9m (2008); 36.7m (2009 estd.); 45.5m (2010 estd.)
EPS (sen) 4.5 (2007); 4.7 (2008); 5.2 (2009 estd.); 6.5 (2010 estd)
DPS (sen) 2.9 (2007); 1.4 (2008); 1.3 (2009 estd.); 2.0 (2010 estd.)

What's interesting was that the company still pays out decent dividends (considering its 703m shares issued). Herein lies the key, it is likely that the controlling shareholders want to hold onto their stakes, and as such they would probably "want" to live on the dividends. That is likely because if you look at the planned capex, its aggressive. Obviously, management is confident about their prospects. Notion VTec has budgeted for the second highest capex of RM50m for FY10 since its IPO in 2005. A sum of RM20m will be used for the Klang plant while RM30m will be spent for constructing the new Thailand plant. So far, RM20m in capex has been spent for 9MFY09 and another RM20m is expected to be spent on 103 new CNCs in 4QFY09. Hence, the total capex of RM45m for FY09 means that Notion VTec is expected to incur high capex for 3 consecutive years, at least until FY10. That to me, is a very good indicator.

Shares Issued: 703m

Major shareholders:
K.I. Permodalan Felda 15..0%
Choo Wing Hong:: 14.4%
Thoo Chow Fah: 10.9%
Choo Wing Onn: 10.6%

Revenue breakdown by key customer
FY08 / FY09e
Western Digital 30% / 36%
Hitachi 9% / 5%
Nikon 33% / 31%
PMG Klang 7% / 5%
Others 20% / 23%

Catalyst #4 - The company has just announced that they have approval to issue and place out 10% additional shares. This should be the biggest kicker. It all ties in with the capex expansion plan. While there have been whispers, I also do not want to over-speculate. Just think for a moment if the 10% is placed out to one of their top 3 clients - that will go a long way to securing long term business and gain a lot more market share of order from that client alone. The 10% if placed, say to Nikon, will not hinder its relations with other customers because its not a substantial stake, but it will elevate Notion VTec to a higher level of acceptance by other customers (if its good enough for Nikon, its good enough for me).

If its Nikon or Western Digital, could this have the same effect as Wilmar had on 3A Resources? Probably not as fantastic because the 3A situation is being transformed in its scalability by latching onto Wilmar's reach and distribution. In Notion's case, although it will be good, it will not be as exciting in terms of "scalability", but still very very good. If you note their corporate actions, they will be doing a 5 shares into one exercise, ex Nov 3 I think, that is a very good move to solidify the share base and capitalisation - hence it is likely that they will announce the placement just prior to the ex-date.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Goto Maki

HK IPOs, Quek & Chua Bet On Wynn To Win

HK IPOs are very very hot. The few that listed in August and early September were fantastic performers. Our own Quek Leng Chan and Chua Ma Yu have latched onto the IPO of Wynn Macau (please read my posting on Wynn Macau http://malaysiafinance.blogspot.com/2009/09/and-they-say-there-is-no-collusion.html ) . Last week saw Glorious Property pricing its IPO in the bottom half for a $1.28 billion deal, while CR Cement raises $825 million after pricing at the top.

But what got everybody a bit nervous was the very dismal performance by Metallurgical Corporation of China, which fell 11.65% below its IPO price on its debut last Thursday after completing the largest Hong Kong IPO year-to-date. MCC's A-shares gained 35% in their debut last Monday in Shanghai, but have since been on a declining trend. MCC's H-shares recovered marginally on Friday with a 1.25% gain to HK$5.68, but went into the weekend having lost 10.6% versus the IPO price of HK$6.35. The H-share is listed in HK and the A-share is in Shanghai. The funny thing is that on a dual listing, you can get the A-share going one way and the H-share going the other.

MCC's dismal performance should be noted because there are tons of big IPOs to follow, including the closely watched Wynn Macau. MCC's poor performance showed that a very high majority of investors are flipping the IPOs. Secondly, many HK tycoons are also big special subscribers to these IPOs and their sell orders can move the market. In MCC's case the grey market was already down 5% prior to the actual listing, an indication of big pre-selling by some big early investors who got the placement. Thirdly, it is after all, the biggest IPO this year, and it coincided with a consolidating global equity market following a torrid run up. Fourthly, these issues are too big to be "managed by approved syndicates", and in HK, investors are very very willing to "cut their losses" with any sign of suspicion that things are not headed in the right direction - quite different in mentality when compared to the average investor in Singapore and Malaysia, who are more incline to be a bit religious in the investing discipline ... "hope & pray".

Quek and Chua's foray to pick up Wynn Macau's placement, to me if I was advising them, is a big no-no. I would be happier to buy Genting Singapore in the open market up to S$1.10 than to subscribe to Wynn Macau. Wynn Macau's HK$12.6 billion offering was only 61.3 percent covered with subscription via margin financing hitting HK$773 million so far. Even before this news, I wasn't keen on Wynn Macau one single bit.

Actually with their contacts, the one IPO that I would highly recommend to buy and hold is Wilmar International's listing. Buy all you can even up to +10% of its IPO price.

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FinanceAsia / StarBiz: Evergrande Real Estate - a Guangzhou-based home developer seeking to raise HK$11.7 billion - is set to go through a listing hearing tomorrow. More mainland developers plan to tap the Hong Kong market for more than HK$20 billion despite the poor performance of newly listed companies.

Mingfa Group, which is aiming for HK$8 billion, will also have its hearing tomorrow and Yuzhou Group, which is seeking up to HK$3.9 billion, may present its case later this week. Meanwhile, the directors of United Company Rusal - the world's largest aluminum producer - will decide this week whether to approve an IPO plan to float a 10 percent stake in Hong Kong, the Sunday Times reported. The Russian aluminum giant is expected to start bookbuilding in November and list in December. According to the British newspaper, Rusal is in talks with potential cornerstone investors including sovereign wealth funds China Investment Corp and Singapore's Temasek.

Wilmar International, the world's largest palm oil processor, plans to raise as much as HK$31.2 billion from listing 733 million shares of its mainland business. The firm is chaired by Kuok Khoon-hong - nephew of Robert Kuok Hock-nien, known as "sugar king of Asia."

Greens Group, a maker of waste heat recovery products had its listing hearing last Thursday. It plans to raise as much as HK$1 billion. Shenguan Holdings, a mainland sausage casing maker, starts bookbuilding today and will open its retail book on Wednesday, eyeing up to HK$1.17 billion. The firm plans to invest 240 million yuan (HK$272.38 million) this year and 469 million yuan in 2010 to expand production capacity. Its first-half net income surged 66.5 percent to 129 million yuan. Shenguan's clients include Yurun Group, an unit of China Yurun Food (1068).

Yingde Gases, Ausnutria Dairy Corp and China Vanadium Titano-Magnetite Mining, which will close their retail book tomorrow, had their retail tranche oversubscribed 3.5 times, twice and 5.6 times respectively, according to margin financing orders at nine brokers as of Friday.

Tycoons Tan Sri Quek Leng Chan and Tan Sri Chua Ma Yu have agreed to take part in the initial public offering (IPO) of Wynn Macau Ltd on the Hong Kong Stock Exchange by investing US$80mil and US$70mil respectively. Quek’s investment is via Guoco Management Co Ltd and GuoLine Group Management Co Ltd, which are indirect subsidiaries of Hong Leong Co (M) Bhd, while Chua’s vehicle is CMY Capital Markets Sdn Bhd. It is learnt that these Malaysian parties are going in independently. Chua is an investor and the attraction in Wynn is purely seen as a China play. But Wynn Macau's HK$12.6 billion offering was only 61.3 percent covered with subscription via margin financing hitting HK$773 million.

Powerlong Real Estate also got a lukewarm. response Both will close their retail book on Wednesday.

p/s photo: Maki Goto