Dahua continues to praise 0733.HK for its cautious expansion, although the agency business has clearly benefited from the buoyant housing market. The company expanded its business by adding staff, but kept the number of employees in secondary institutions at around 260, the same as at the end of 2008.

Dahua expects the company to be more mature and expand its business at a cautious and prudent pace so that it can better survive in cyclical industries. Hefu brilliant suffered huge losses due to the rapid development of branches in 2008, which may not happen again. Dahua maintained its FY09 profit forecast of HK $84 million, but raised its FY10 profit forecast by 10.1 per cent to HK $131 million, driven by cost-saving efforts.

Dahua raised its target price to HK $3.55 from HK $2.35, equivalent to eight times the 10-year price-to-earnings ratio, saying the valuation of the stock was very reasonable, with mainland property developers trading at 10 times forecast 10-year earnings.

The stock rose 1.28 per cent to HK $2.38 yesterday.