China Merchants said that the sale of shares by major shareholders of 01198-HK to the fund at a premium would further boost the company's valuation, raising its target valuation of HK $3.20, corresponding to 9x2011PE, which is a 10 per cent premium to the industry average, and downgraded to better than the broader market.

China Merchants said that the EPS forecast for the imperial dynasty from 2010 to 2012 remained unchanged at 0.26,0.35 and 0.47 yuan. From 2010 to 2012, net profit increased by 13.6%, 32% and 33.1% respectively compared with the same period last year. At present, the average annual PE of Hong Kong stock furniture industry from 2009 to 2011E is 12.8,10.5 and 8.2 times. On September 15, 2010, Xie Jinpeng, the company's controlling shareholder and director, sold 2 million shares to Ajia Partners, an asset management company, at HK $2.28 per share, accounting for about 0.36% of the company's existing issued share capital. The sale price of HK $2.28 shares was about 3.64% higher than the previous day's closing price. Xie Jinpeng's shareholding decreased from 44.08% to 43.72%.

The imperial dynasty's furniture closed at HK $2.9 yesterday.