STOCKWATCH: Wharf Holdings lower after Cross Harbour stake disposal
HONG KONG (AFX-ASIA) - Wharf Holdings Ltd shares were lower in morning trade following news that the company has disposed of its entire 26.7 pct stake in Cross Harbour (Holdings) Ltd, dealers said. They said the stake disposal should be unrelated to any debt repayment as the company is not highly geared. Wharf said today that it has sold a 26.7 pct stake in Cross Harbour for 614.1 mln hkd. The conglomerate will report its final results next week. At 11:14 am, Wharf Holdings was down 0.80 hkd or 4.15 pct at 18.45, on trade of 1.52 mln shares. The Hang Seng Index was down 378.85 points at 12,775.59. Philip Tulk, an analyst with Lehman Brothers Securities, said Wharf is not highly leveraged, with a gearing ratio of around 30.0 pct on a net debt to capital basis. "I suspect that the company is trying to divest its non-core business, and to focus on its terminal and rental business," he said. An analyst with a local brokerage agreed that the stake disposal should be irrelevant to its loan repayments, adding that the transaction should have little financial impact. "For Wharf, the majority of income is derived from its rental properties, and Modern Terminals Ltd," he said. Earlier this year, Wharf increased its stake in Modern Terminals to 55.3 pct from 50.8 pct. The analyst said Wharf is likely to report lower results for 2000, as its previous year results were boosted by an exceptional gain of 3.59 bln hkd from the public flotation of i-Cable Communications. He said his brokerage is looking at a net profit of 2.30 bln hkd in 2000, down from 4.21 bln hkd a year earlier. "The company is expected to benefit from the recovery in the rental market, and its terminal business should also record a stable growth in 2000," he said. However, the terminal business will face contraction in 2001 due to the slow down of the U.S. economy, he said. He said his brokerage has a "buy" rating on Wharf, with a target price of 23.40 hkd.
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