Broker lifts Wharf to buy

PUBLISHED : Sunday, 27 April, 1997, 12:00am
UPDATED : Sunday, 27 April, 1997, 12:00am

WHARF Holdings is involved in infrastructure, hotels, telecommunications and investment consultancy, with a property portfolio stretching from Hong Kong, the United States, Singapore, Bermuda to the Cayman Islands.

Brokerage Merrill Lynch has recently updated its intermediate recommendation on the stock to buy from accumulate, saying Wharf has strong growth bolstered by property profits and declining cable-television losses.

Estimated 24 per cent profit growth in 1997 should be underpinned by a modest 6 per cent growth in rental income to $3.3 billion, a $100 million loss reduction at Wharf Cable Television and an increase in property-sale contributions of about $1 billion.

Property-development profits are expected to rise to $1.2 billion in 1997 and $2.7 billion in 1998.

Merrill forecasts that Wharf Cable Television will reach its target of 407,000 subscribers by December. With such growth, losses will continue to decline from $580 million in 1996 to about $480 million in 1997 and $120 million in 1998.

Wharf has under-performed the Hang Seng Index by 15 per cent over the past three months and is now trading at a 40 per cent discount to its estimated net asset value.

Although Wharf's 1997 price-earnings (PE) ratio of 19.3 times is at a 17 per cent premium to the conglomerate sector, its 1998 estimated PE of 11.7 times is at an 11 per cent discount to the sector average.