After market hours today, the Company announced that it was informed by Nian’s Brother Holding Limited (‘Nian’s Holding), a substantial shareholder of the Company, that Nian’s Holding was approached by an independent potential investor. The independent potential investor expressed an interest in investing in a substantial stake of the Company (‘the Proposed Investment’). The negotiation is at its preliminary stage and no agreement has been entered into between the parties, according to the Company’s announcement.
The Proposed Investment may or may not proceed. We therefore do not recommend buying the stock based on speculation that the Proposed Investment will occur. However, we do maintain our current ‘Buy’ rating and target price of HK$8.50 per share, based on the Company’s fundamentals. Our target price represents 17.8x fully diluted FY11 PER and 0.4 fully diluted PEG. Costin’s share price closed today at HK$4.00, equivalent to 7.8x 11PE, 5.3x 12PE and 0.2x PEG.