Outlook positive for undervalued Wharf

PUBLISHED : Sunday, 05 April, 1998, 12:00am
UPDATED : Sunday, 05 April, 1998, 12:00am

WHARF Holdings oversees a range of businesses covering property, infrastructure, hotels, and communications, and has operations in Hong Kong, the mainland and the US.

Brokerage DBS Securities Hong Kong has a 'buy' on the stock, saying the fall of its share price over the past six months has been overdone.

Wharf shares are trading at a 57 per cent discount to the estimated net asset value (NAV) of $36.03 a share, which makes them appear grossly undervalued.

The company is one of the best-valued conglomerates and property investors, and, despite the pending litigation cases and the uncertain property market facing the group, the high discount to NAV appears unjustified.

Income from investment properties - the main earnings driver - will fall a mere 5 per cent this year as a full-year contribution from its Hollywood Plaza development in Diamond Hill should compensate partly for the fall in rents and occupancies.

The company will return to positive growth next year, with the addition of extra leasing space from the upcoming Gateway II development in Tsim Sha Tsui.

Wharf should produce an average growth rate of 23 per cent between 1997 and 1999, excluding exceptional items, a rate much higher than other property investors.

Development profits are rising and the company's cable television business is moving out of the red.

Another positive is that the group's Modern Terminals should be the leading beneficiary of the shipping alliance reshuffle.