...Andre Juice has a market capitalization of $650 million, which at 35 cents is most certainly a small-cap, and last year, 2008, it earned $1,770,000, after earning $2,280,000 the previous year. However this year the company has slumped, but has earned just $8 million during the 9 months to December. I do remember that when I was asked about this company I did advise my questioner to be very careful, even I might have said sell. I thought that this company's initial profits were too high, and therefore rather suspicious. During 2007 the price of this share did get up to 98 cents, so that is the trouble with small-caps, they tend to dissolve if you are not careful, as at this time I still do not see the prospects of a good quick recovery, so I would not be a buyer...

...Between Dah Sing Bank (2356) and Dah Sing Financial (440) it is hard to choose, but they would both be nice morsels for the predators, as they do not have a large premium to NAV, but the shareholding structure is rather tight. The same applies to Chong Hing Bank (1111) although this could be easier to capture because, like BEA, it is older and the next generation could think of better things to do with their money.

It would also be nice and tidy if the big Chinese banks, ICBC and Bank of China would mop up the minority shareholders in their Hong Kong subsidiaries although it is believed that by keeping them separate, there is more chance of evading some of the regulations imposed by this or that governments.

But with the Chinese banks having made up ground they have lost, for the time being, some of the attractions of being quite so patently cheap. But with all the fears of corruption, an age-old Chinese culture, one should never place too much reliance on these government controlled companies, although it is because of their size that gives the outside shareholder better leeway. It would be much harder to knock off few billion dollars from one of these monstrous leviathans, like ICBC, CCB or even China Mobile (941),but it would not totally scuttle these companies.

Question: Chinese banks (5 of them) - are you bullish about these banks on a 10 year basis? I was quite nervous when I heard that government encouraged them to lend money as I still remembered the time when they had to sell NPL to the AMCs in China. If you have to pick two, which would you pick? Would you pick it based on P/B, PE, return on equity or quality of management?

Answer: Chinese Banks. The management is still unknown, and there could be a risk, but because of size it should not be that great, as a loss of, say, RMB5 billion, to ICBC would not be ruinous. For the longer term I would choose ICBC, because of its size, and BComms, because there is the outside factor of significant shareholders, in this case HSBC with a 20% interest. But then again if you hold HSBC, which would indirectly benefit, then take CCB, at present, by my reckoning the cheapest.