OUTLOOK: Cheung Kong 2000 net profit 17.0-25.22 bln hkd

---- by Frances Huang ----     	    	     HONG KONG (AFX-ASIA) - Cheung Kong (Holdings) Ltd is expected to report tomorrow a 2000 net profit of 17.0-25.22 bln hkd, compared with 59.37 mln hkd a year earlier, as the contribution from Hutchison Whampoa Ltd falls back from exceptional levels, analysts said.	    Hutchison will also likely have made large provisions on its telecom investments, particularly in Vodafone PLC, amid global weakness in telecom share prices, and this accounts for the wide range in the forecasts, analysts said.	    In the first half of 2000, Hutchison Whampoa made 30 bln hkd in provisions for its Vodafone and other telecom exposures. Further provisions are expected in the second half, with Vodafone shares having lost half their value in the past 12 months. 	    Hutchison Whampoa currently holds a 3.5 pct stake in Vodafone. It disposed of a 1.5 pct stake early last year.	    Hutchison Whampoa is itself expected to report Thursday a 2000 net profit of 33.3-37.67 bln hkd, compared with 117.3 bln in 1999 when it received a windfall of 118 bln from the disposal of its stake in Orange PLC.	    Cheung Kong reported a first half 2000 net profit of 17.39 bln hkd, up from 4.92 bln as associates' contributions rose to 15.96 bln hkd from 3.89 bln.	    "Without Hutchison Whampoa's provisions, there would be little surprise in Cheung Kong's results," said Anthony Wu, analyst with Lehman Brothers, who expects Cheung Kong to report 21.9 bln hkd in net profit.	    Marco Mak, an analyst with Tai Fook curities, said his house expects 15 bln hkd in additional Hutchison provisions in the second half, putting Cheung Kong's full-year net profit at 17 bln hkd for an EPS of 7.56.	    "Cheung Kong Group is always prudent in its finanaces. I expect there to be no exception this time," Mak said, adding his estimate for provisions covers not only the Vodafone losses but also those of its 3G perations in Europe.	    Wu of Lehman Brothers said that at the operating level, he expects Cheung Kong to add about 100 mln hkd from the property development business in the second half, after a first half operating profit of 1.9 bln hkd.	    "Some of its major property development projects were completed in the first half where (most of the) the 2000 operating profit came from," he said.	    Cheung Kong completed the Mahattan Heights, Peninsula Heights, Costa del Sol of Laguna Verde, Monte Vista and Sheffield projects in the first half.	    Core Pacific Yamaichi International analyst Nestor Lai said Manhattan Heights and Laguna Verde will prove to have been the main revenue sources for Cheung Kong last year.	    "To my knowledge, the increase in property sales was the result of a 28-30 pct rise in sales volumes, rather than of higher prices," said Lai, who sees operating profit rising to 3.4 bln hkd from 1.26 bln in 1999.	    Lai said Cheung Kong is expected to report 2000 net profit of 25.22 bln hkd, with EPS at 10.89 hkd.	    Tai Fook's Mak said Cheung Kong launched Manhattan Heights in 1997 when property prices were peaking and was able to pre-sell flats at those levels. Under percentage-of-completion accounting rules, it will recognize a large part of that pre-sales revenue in 2000. 	    "The company sold the project at an average price of more than 10,000 hkd per square foot then, almost double its construction costs. That's why the company will be able to book a higher profit from property sales," he said.	    While Cheung Kong will likely have suffered a decline in net profit in 2000, analysts said they still recommend a buy on the stock.	    "Cheung Kong is trading on its NAV (net asset value) instead of its profit," Lehman's Wu said, adding that he estimates the NAV at about 102 hkd.	    He said he has a 12-month target price of 120 hkd for Cheung Kong.	    Lai of Core Pacific Yamaichi said he expects property prices to recover in the second half of 2001 in the wake of the government's recent stimulus measures.	    "Property prices are expected to increase about 3.4 pct in 2001. As one of the major property developers in Hong Kong, Cheung Kong will benefit from the improvement," Lai said.	    Salomon Smith Barney said it expects Cheung Kong to report 2000 net profit of 22.19 bln hkd.	    Daiwa Securities analyst Jonas Kan said his house expects Hutchison Whampoa to take a further 8.0 bln hkd in provisions for the second half of 2000, putting Cheung Kong's net profit at 18.4 bln hkd and EPS at 7.95.

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