Friday, August 07, 2009

Hua Han purchased

This morning I added Hua Han (587) to the private portfolio paying HK$1.00 per share.

Hua Han's main business is the manufacture and distribution of pharmaceutical products and feminine hygiene products. Given the expansion of the the PRC health care sector and the continued growth in the number of middle class households in China, this can be expected to be something of a growth industry. Unlike many other Hong Kong listed companies, management has remained focused on its business and resisted the urge to use shareholders' funds to speculate in the stock market.

The company is trading on a single digit PE ratio (7.2x historically but this will be diluted by the recent capital raising) and has a considerable amount of net cash on hand. A minor negative is that the company has flagged that it is looking to expand by way of acquisition which is not always a good thing. The latter may account for the fact that the company does not pay a dividend.

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