STOCKWATCH: Swire Pacific -- 3 (provisions higher than expected)

South China Securities research chief Patrick Pong said he had forecast a net profit of 4.2 bln hkd for Swire Pacific, adding that the main reason for the shortfall was due to the higher-than-expected provisions of 1.7 bln hkd. Pong had forecast a total provision of 1.4 bln hkd, including 1.0 bln for Ocean Shores. This 1.0 bln hkd was based upon expectations Swire would factor in a 500 hkd per square foot loss on the basis the development should achieve an average 3,600 hkd per square foot selling price, having cost 4,100 hkd per square foot to build. Pong said he believes Swire booked an additional 700 mln hkd provision for Ocean Shores after lowering the estimated selling price to about 3,250 hkd per square foot. "This would be reasonable as they have to discount factors like the size of the Ocean Shore development which is very large," he said. Pong said he would only be able to get details and the basis of the provisioning after an analysts' meeting with the company this evening. He said the government's efforts to stimulate the property market have not really helped the Tseng Kwan O area where Ocean Shores is located. He noted that Swire Pacific's earnings excluding the exceptional items saw better than expected growth. Pong sees strong support for the shares at 50 hkd.

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