Morgan Stanley suggests selling Legend before the earnings report

Morgan Stanley suggested that investors should make profit-taking before Legend Holdings (0992) announces the earnings report, in that the current price of Legend did not fully reflect the risk of business transfer. It confirmed the investment rating of Legend at ˇ§neutralˇ¨.

It would be impossible for Legend to maintain the annual turnover up to RMB60 bln just through PC sales by 2003, which can explain why Legend was so eager to diversify its businesses. Despite its advantages over its domestic competitors, Legend lacks core technologies in several businesses to be tapped, which cast obscurity over its future development.

As for the partnership between Legend and AOL, Morgan Stanley predicted that both sides would face some equivocal systems and Legend would make great efforts to convert the English content of AOL into Chinese. Therefore, the cooperation will unlikely bring profit to Legend in the short term while Legend will reap profit from a long-term perspective.

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