DBS Vickers initiates Xinren Aluminium (MN5.SG) at Buy with a $0.70 target.

Says the company is well positioned in the Chinese aluminum industry as an integrated manufacturer with 275,000 tons smelting capacity and 50,000 tons fabrication capacity.

Notes Xinren was profitable in the last three years, unlike some of its peers; "profitability stems from its two cost competitive smelting plants, which were constructed at sites where there is abundant electricity at generally lower tariffs."

Target price pegged to 7.9x FY11F P/E, translates to 2.2x FY11F P/BV, a 38% discount to worldwide peers, adjusting for no equity ownership of the smelting plants, potential risk of policy changes and volatile aluminum prices, and zero dividends.

"Undemanding valuation and poor share performance since listing have excessively factored the risk."

Shares are up 5.5% at $0.480.