PUBLISHED : Sunday, 25 September, 2005, 12:00am
UPDATED : Sunday, 25 September, 2005, 12:00am

JP Morgan says the results of Guoco Group last week were above expectation but the recommendation on the property and investment firm remains 'neutral'.

Guoco announced earnings of $3.2 billion for its 2005 year, an increase of 32 per cent year on year and 45 per cent above the consensus.

Controlled by Malaysian tycoon Quek Leng Chan, Guoco has become more of an investment management company with 75 per cent of its net asset value (NAV) in cash and marketable securities and 86 per cent of operating income from treasury and investment activities; so earnings were not the focus of the results, says the broker.

The cash pool of more than 50 per cent of the portfolio may hinder returns but provides good downside protection. Based on its performance in the past three years, the broker forecasts an NAV expansion of 5-10 per cent in 2006, which should give the stock a total return of 10-15 per cent over 12 months.

At a price of $78.60 on September 16, Guoco was discounted 23.8 per cent to its estimated NAV, which is narrower than its long-term average of 38 per cent.

However, the broker believes the stock can be attractive to long-term investors who like its low-risk cash proxy, high dividend yield of 4.8 per cent and past record of creating value from its investment team.

The counter closed on Friday at $77.90.