Analysts split over Beijing Enterprises

PUBLISHED : Wednesday, 22 April, 1998, 12:00am
UPDATED : Wednesday, 22 April, 1998, 12:00am

Analysts were divided yesterday over whether Beijing Enterprises Holdings, which on Monday reported a 48 per cent rise in full-year net profit excluding exceptionals to $426 million, would be able to meet its target for core earnings growth this year.

DBS Securities analyst Anthony Mei Hsiao-tung expected the only listed conglomerate of the Beijing municipal government to achieve 19 per cent growth this year to $509 million and 8 per cent next year to $553 million.

His forecasts reflect a cut of between 4 and 5 per cent because he sees growth at Beijing International Switching System (BISC) slowing and its profit margin being squeezed.

Mr Mei said BISC and Beijing Yanjing Brewery would continue to be the big income drivers with Beijing McDonald's showing strong growth this year. Growth at other businesses, such as its hotel and department stores, would be flat, he said.

Other analysts were less positive.

One analyst at a European brokerage said: 'The company will surely post a profit fall this year if it fails to receive an asset injection from its parent.' He expected most operations to show single-digit core earnings growth, although Yanjing Brewery would see a 20 per cent increase.

However, profit at BISC would tumble as it cut prices to gain market share, he said.

He put a sell recommendation on the stock, saying it was expensive.

Another analyst at a European house forecast a flat net profit for the company this year. Weak consumer spending and tourist arrivals from Japan and Southeast Asia would continue to put pressure on the retail, hotel and tourism business, he said.

Yanjing Brewery accounted for about 22.8 per cent of Beijing Enterprises' net profit excluding exceptional items last year, BISC 21.4 per cent, Capital Expressway 11.9 per cent, Wanfujing department store group 10.9 per cent, Jianguo Hotel 5.1 per cent and Badaling Tourism 4 per cent.