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Strategies & Market Trends : HONG KONG

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To: Tom who wrote (1482)	3/25/1998 6:38:00 PM
From: William Shen	Read Replies (3) of 2951

Tom, I like data driven approaches you just outlined. But unfortunately, you are dealing with red chips. If you want real hard data or numbers on US standard, then you should certainly stay away from H shares and to a certain extent red chips. If the issue is cash flow, then there is at least an US$80 MM plus gauranteed cash flow from the highway project in Shanghai per annum. The tobacco factory is a classsic cash cow business generating stable cash with a very strong brand "Double Hapiness" in China (and high margin). As a matter of fact, none of SIHL's current subsidiaries require massive investment. All of them should generate strong cash flow though the growth prospects are probably less exciting than high techs like Stone or Legend. So bottom line, if you are looking for cash flow, I am quite comfortable in saying that SIHL is probably one of the safest bet in red chip (part of the reason why it has recovered so much value in stock price since the crash). I think the true challenge for SIHL is to find high growth area and make the right strategic acquisitions since stock prices are not supported by cash flow, but earnings growth. Look forward to any further question you may have on this stock.

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