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SCMP Reporter

Starlite Holdings  Recommendation: Buy  Brokerage: Vickers Ballas  Starlite is a niche player in Hongkong's high-end printing sector and it has earned an international reputation and support from multinational manufacturers for its quality work. Hence the company is less vulnerable to keen competition and enjoys a relatively high profit margin.

  With its leading position, Starlite is well-positioned to benefit from the buoyant external trade activities in the Pearl River Delta region and the anticipated recovery in the US market.

  The company has started to penetrate into the China market with its production facility in Shenzhen.

  The new plant will further help Starlite exploit the vast China market where premium consumer products with quality packaging are in great demand. The China market should brighten the prospects of the company and become a major impetus for growth in the coming years.

  Starlite's strength lies in its award-winning management team, its continued investment in advanced machinery and technology which has allowed the company to sustain a high profit margin as well as its forefront position in the industry.

  Apart from its China market potential, the company's dynamic earnings growth prospect has largely been overlooked.

   Innovative International  Recommendation: Buy  Brokerage: S. G. Warburg  Innovative enjoys a crucial and significant cost advantage over its international competition in its core business of telecommunications equipment (43 per cent of turnover). Net margins are around 25 per cent, as they are in the other main area of car accessories (39 per cent of turnover).

  Sales of antennae have so far been confined to the replacement market. However, deals have been reached with Audi and Opel to break into the new car market previously dominated by Japanese and European companies. Diversification of products and customershas prevented a margin squeeze.

  All of Innovative's increasingly vertically integrated production is located in China. The cost benefit this gives is being extended to the employment of Chinese engineers, enabling the company to shift higher end functions such as research and development to China.

  Sales to China are expanding fast. The company has reached distribution deals with two Chinese partners, who between them control 800 points of sale. As well as its own products, Innovative is importing and selling Japanese and US-built cars into the Tianjin tax-free zone in northern China. Most sales in China are in US dollars. On a net basis Innovative is a beneficiary of yuan depreciation.

  Since listing in September 1991, the share price has outperformed the Hang Seng Index by 50 per cent.



China ties make for top buy