DBS maintains its 3828.HK buy rating, with its target price rising from HK $1.70 to HK $1.78, equivalent to 10 times forward earnings for fiscal year 2010.

Minghui International's interim results were broadly in line with expectations, with net profit falling 26 per cent from a year earlier to HK $40 million, but gross margins exceeding expectations of 30.3 per cent, compared with 27.8 per cent in the same period last year, DBS said, adding that this was offset by increases in distribution costs and administrative fees, which saw the company's operating margin fall to 14.7 per cent from 17.5 per cent a year earlier.

According to DBS, the institutional operating environment faces challenges, but Minghui International has won more new customers (Erdos Hotel, New Century Hotels and Resorts, United Airlines, Northwest Airlines and Austrian Airlines, etc.), paving the way for the company's strong growth. DBS said it thought Minghui's profit growth rate could rebound to more than 20% in 2010.

Minghui International rose 9.8% to HK $1.12 yesterday.