Wheelock's methods apt
I REFER to the article 'Wheelock's one-off props for profit become a deterrent' by Adela Ma, which appeared in Business Post on July 27 and on which I would like to comment.
1. The article suggested that there is a 'total lack of transparency' at Wheelock. We think otherwise. We suggest that Wheelock is perhaps one of the most transparent of all major publicly-listed companies, as virtually 90 per cent of its earnings are from Wharf (Wharf's agenda and results are very well known to the investment community), New Asia and Lane Crawford.
2. Every year management endeavours to generate profits from its business portfolio for the benefit of its shareholders. This year there were exceptional deficits which were mostly one-off.
In the circumstances, it is sensible for management to seek exceptional profit opportunities to bridge short-term deficits so as to smooth out the earnings stream. Is the article suggesting that our shareholders would prefer and be happier to see only exceptional deficit with no exceptional gains, thereby creating a reduction of profits as compared to last year? That cannot be so.
To suggest there is something wrong with exceptional gains is inappropriate. Surely, market assessment is reflected in the share price. 'Deterrent' is a very heavy word to use.
3. Wheelock's substantial reliance on Wharf's assets and earnings (until such time that other business areas mature) is a reality; Wheelock's share price is essentially underpinned by the performance of Wharf. Wharf has a record of 27 years of uninterrupted profits growth. Wharf and Wheelock share prices have performed very much in line with other property investment stocks in Hong Kong.
Many investors think Wheelock should really be viewed as a property investment-related counter and one questions whether it is meaningful to say Wheelock lags other hongs that have built a broader business base over many years. Everyone knows Wheelock was reactivated only recently. Everyone knows that new businesses take at least three years to stabilise.
John T Hung Managing Director Wheelock and Company Limited
