Not vested. From Phillips:-
Risks
Global economy recovers without obvious inflation and gold price goes down significantly;
The rate of expansion of the Company may be below expectation.
Resources tax policy appears and taxation burden rises for gold miners.
To buy proactively for the expected high-speed growth
Real Gold Mining will expand its main business continually, and its profitability can also keep at the high level. Plus with the gold is expected to spiral up, we forecast its turnover of FY10 and FY11 of RMB 1.53 billion and RMB1.87 billion, increase by 52% and 22% respectively, net profit of RMB794 million and RMB970 million, increase by 51% and 22% y/y respectively; and EPS of RMB1.03 and RMB1.26.
Regarding P/E and P/B valuation, the gold companies listed in other markets and HK have obvious value premium to relative indexes in most of its records, with average 100% and peaked 200%. Limited by the small scale, the P/E of Real Gold Mining is fairly equivalent to that of HSI, with the historical relative P/E averaging at 0.83X.
Taking consideration of the high growth potential, we give it the relative P/E with 0.88X. Plus with the average 14.59X P/E of HSI since 1993, the 12-m TP of the Company will be HK$15, over 40% premium than current price. We initiate it Buy rating.
By the technical analysis, Real Gold Mining is going on the upwards trend, showing a bull market in the medium to long term. In March, 2010, its stock price has broke through the downwards pressure line since December, which is still a good time to buy the Company.