Domestic

Li Ka-Shing's Cheung Kong may report profit fall

(Agencies)
Updated: 2010-08-04 16:42

Cheung Kong (Holdings) Ltd, Hong Kong billionaire Li Ka-shing's flagship builder, will probably post a decline in first-half profit before revaluations as it earned less from apartment sales and unit Hutchison Whampoa Ltd.

Underlying profit for the six months ended June 30 may drop to HK$7 billion ($902 million) from HK$8.2 billion a year earlier, according to the median estimate of five analysts surveyed by Bloomberg News. The estimates range from HK$4.5 billion to HK$9.8 billion. Cheung Kong shares declined.

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The world's second-biggest builder by value may post lower profit from apartment sales even after home prices rose 10 percent in the first half, as the earnings won't reflect all sales. Hong Kong developers normally sell apartments that are under construction and book profits after they are completed. Both Cheung Kong and Hutchison will report earnings tomorrow.

"The first-half numbers will probably reflect sales they made last year, so there won't be many surprises in that," Eric Wong, a Hong Kong-based analyst at UBS AG, said in an interview. "The market is interested in their views on how property sales will go in the second half."

Cheung Kong shares fell 0.2 percent to HK$96.5 at the noon trading break in Hong Kong today. Hutchison Whampoa rose 0.2 percent.

Hutchison

Hutchison Whampoa, Li's biggest company with operations in 54 countries, may report first-half profit fell 25 percent to HK$4.3 billion, according to the median estimate of four analysts surveyed by Bloomberg, because one-time gains from a year earlier weren't repeated.

Hutchison probably posted higher earnings from its ports, retail and energy businesses, helped by a rebound in the global economy, Citigroup Inc analyst Anil Daswani wrote in a July 19 report. 3 Group, operator of Hutchison's high-speed mobile-phone businesses in Europe and Australia, is adding subscribers after offering discounts on Apple Inc's iPhone handset, according to Daswani.

Li, 82, sold businesses and used earnings from Hutchison's non-telecommunications units to invest at least $25 billion in 3 Group, which had been unprofitable since operations began in 2003. In last year's first half, Hutchison booked a one-time gain of HK$3.6 billion from the merger of its phone unit in Australia with the local subsidiary of Vodafone Group Plc.

Mass residential projects

Cheung Kong is this year's second-worst performing stock in the Hang Seng Property Index, which tracks seven of the city's biggest builders. The stock has fallen 3.3 percent in 2010, compared with a 0.6 percent gain in the benchmark gauge.

Cheung Kong "is more focused on large-scale mass residential projects" than its rivals, Trevor Cheung, an analyst at BNP Paribas, wrote in a July 28 report. "It has less scope to enjoy extraordinary profit margins in times of a super bull market."

Hong Kong's luxury home prices may gain 10 percent in the second half after having risen by the same margin in the first half, property broker Jones Lang LaSalle Inc said. The segment, defined by units valued at more than HK$10 million and area of more than 1,000 square feet (93 square meters), has been fueled by record-low mortgage costs and buying by mainlanders.

Cheung Kong had the most home sales by value in the first half among Hong Kong developers, according to BNP's Cheung, who has a "hold" rating on the stock.