Citi lowered its target price for 0053.HK from HK $63.75 to HK $60.00, valuing the company on the basis of current net cash / share, which had previously been discounted by about 30 per cent of net assets per share. Citigroup said Guohao lost HK $2.5 billion in the first half of 2009, of which HK $2.4 billion was unrealized market capitalization and exchange losses. Citigroup cut its forecast for earnings per share for fiscal year 10 by 1.4 per cent, from HK $2.59 to HK $2.55, and conservatively expects a further loss of HK $1.1 billion in the second half of 2009. Citigroup said it conservatively expected Guohao to lose 15% of its inventory assets in FY09, but generate a nominal return of 1% in FY10-11. But Citi said that despite the bleak outlook for 2009, the stake in Bank of East Asia (0023.HK) provided Guohao with a strong banking business in Hong Kong and mainland China, which would have long-term strategic value, and did not rule out further increase in Guohao's holdings.

Citigroup maintains Guohao's buy rating because the share price is more than 20% off net cash per share and 44% off net assets per share.

Guohao Group, the second-largest shareholder in Bank of East Asia, fell 1.26 per cent to HK $47.20 yesterday.