OUTLOOK: Hutchison Whampoa 2000 net profit 33.3-37.67 bln hkd

HONG KONG (AFX-ASIA) - Hutchison Whampoa is expected to report tomorrow a 2000 net profit of 33.3-37.67 bln hkd, compared with 117.3 bln hkd the previous year when it received a windfall of 118 bln from the disposal of Orange Plc, analysts said.	    They said Hutchison could make exceptional gains of more than 20 bln hkd from investment disposals, with the swing factor being how much the company intends to write off to reflect the fall in value on its Vodafone Plc holding which it acquired via the Orange and then Mannesmann AG transactions last year.	    In the first half, Hutchison reported a net profit of 31.12 bln hkd, up from the year earlier 7.31 bln on the back of a net exceptional gain, after provisions, of 25.52 bln.	    Arthur Law, an analyst with Core Pacfic Yamaichi Securities, said Hutchison is expected to report net profit of 33.3 bln hkd after exceptional gains of around 22 bln on investment disposals.	    "The 2000 net profit is likely to be boosted by exceptional gains, with core earnings of around 11.1 bln hkd," up from the previous year's 7.80 bln, on steady growth in the ports business, which accounts for 30 pct of basic income, Law said.	    Looking ahead, it is highly likely that Hutchison will acquire more overseas ports while its container terminal business will benefit from China's imminent WTO accession.	    Cusson Leung, an analyst with ING Barings, agreed that Hutchison should experience a rise in core earnings given the positive performance in its port, infrastructure and energy divisions.	    "On an EBIT (earnings before interest and tax) basis, core earnings should increase by 16 pct in 2000 but the growth will only be around 4.0 pct after including interest expenses," Leung said.	    "The company will have interest expenses of around 7.50 bln hkd in 2000, compared with 5.0 bln in the pervious year ... the company has become more leveraged because of its (3G) telecom investments," Leung said.	    He said his house is looking at a net profit of 37.67 bln hkd, subject to how much provision the company will make for its equity interest in Vodafone.	    Hutchison obtained an original 5.0 pct stake in Vodafone via the sale of its 10.20 pct in Mannesmann in early last year but in the past 12 months Vodafone shares have lost about half their value to close at 2.00 stg on Friday.	    In the first half, Hutchison made a provision of 30 bln hkd against the fall in value of the Vodafone and other holdings and Leung said it may be forced to add another 3.30 bln hkd in the second half.	    At present, Hutchision owns around a 3.50 pct stake in Vodafone, after selling 925 mln shares for about 39 bln hkd in March 2000. In the past six months, the company has issued 3.0 bln usd worth of notes convertible to Vodafone shares. 	    On full conversion, Hutchision will end up holding a 1.50 pct stake in Vodafone.	    Ben Tam, an analyst with Dao Heng Securities, said a portion of Hutchison's exceptional gains could have evaporated because of substantial start-up costs for its 3G business, especially in Europe.	    "We have pencilled in a 200 mln usd start up loss for its telecom operations in 2000," Tam said, referring to its extensive involvement in 3G development projects across Europe.	    Tam said that while the company may gain some 2.10 bln usd on in the deal which sees NTT DoCoMo taking a 20 pct stake in Hutchison 3G UK Holdings Ltd and KPN Mobile taking 15 pct, it is unlikely to book them for the year as it may prefer to use the proceeds to cover 3G start-up costs, Tam said. 	    Tam noted the substantial 3G investment costs will gradually surface over the next few years "and the company will no longer have many exceptional gains from asset disposals to cover these costs."

Related stock : (NIL)