According to a report published by DBS, it maintains the holding rating of Lingbao Gold (03330-HK); the target price was lowered from HK$3.19 to HK$3.15, a 12% premium over the market price based on a 12 times predicted price-earnings ratio and a mixed valuation of 1.2 times the price-to-book value ratio.

DBS indicates that considering the stock's generally high volatility, the target valuation was adjusted to a trading range in line with the historical mid-cycle. Its net profit for the second half of fiscal year 2009 is expected to increase 19% over the first half of fiscal year, and the pace of recovery is expected to continue, thanks to higher metal prices, particularly gold. DBS further raised its net profit forecast for fiscal year 2009 by 16%, having previously raised its gold price forecast from $880 per ounce to $900.

However, Daifuku gave Lingbao Gold a sales rating; the target price was only HK$2.46, corresponding to an estimated price-earnings ratio of 12 times in 2010, which is 13% off the market price. It indicates that Lingbao Gold is still the least attractive gold stock in the industry. At a time when the outlook for the industry is generally optimistic recently, its performance in the first half of the year was disappointing. Furthermore, the smelting business's low self-sufficiency rate in producing gold powder will continue to limit the company's profit growth potential. Daifuku expects that if the Lingbao mining industry fails to increase the self-sufficiency ratio of gold refining powder or expand into the mineral gold business in the short term, the rise in gold prices in the second half of 2009 and 2010 will increase the company's gold sales costs, which in turn will seriously affect the gross profit margin.

Lingbao Gold fell 4.03% last Friday to close at HK$2.86.