Hutchison, Cheung Kong dip despite upgrades

PUBLISHED : Saturday, 15 August, 2009, 12:00am
UPDATED : Saturday, 15 August, 2009, 12:00am

Better than expected interim results from Hutchison Whampoa and Cheung Kong (Holdings) have prompted analysts to revise up their share price targets and ratings on the two conglomerates.

Still, shares in Hutchison fell 1.46 per cent to close at HK$57.30 yesterday, while Cheung Kong slid 1.48 per cent to HK$96.48.

Morgan Stanley raised its price target for Hutchison to HK$73 from HK$71 and kept its 'overweight' rating on the stock.

The investment bank believes Hutchison's port business has outperformed the industry and the improving economic outlook for the second half should lead to a significant earnings uptick in the division.

On the 3G business, Goldman Sachs said cash-burn reduction was at an encouraging pace and no longer a drag on cash flow. It said the market focus would shift to Hutchison's non-3G businesses, which are well poised to benefit from macroeconomic recovery in six to 18 months.

Goldman set its price target at HK$69, up from HK$65, and maintained its neutral rating on the stock. Other analysts set price targets of between HK$57 and HK$75.20.

For Cheung Kong, analysts had a price target of HK$88.40 to HK$121.02.

Merrill Lynch upgraded Hutchison to a 'buy' from 'underperform', citing the group's stronger than expected interim results underpinned by a solid contribution from China development. The brokerage raised its price target to HK$111 from HK$88.

JP Morgan expects Cheung Kong's full-year underlying profit, excluding Hutchison's contribution, to reach HK$9.1 billion, up 9 per cent from its previous forecast, on strong gains from China, where 1.2 million square metres of projects will be completed this year. It lifted the price target to HK$115 from HK$100.

Goldman said: 'We like Cheung Kong for its sizeable Hong Kong land bank and its not having to chase land purchases at high prices amid the current tight land supply.'

More than 80 per cent of Celestial Heights Phase 1 buyers have completed their transactions, so there is little default risk.

Celestial Heights Phase 2 and Festival City, a joint venture with MTR Corp at Tai Wai railway station, will be launched in the second half. They would allow the group to secure HK$4.1 billion, or 60 per cent of Hong Kong property sales, next year.

Goldman lifted its earnings estimate for Cheung Kong by 22 per cent this year and 5 per cent next year. The new price target is HK$122.

Sinking feeling

Hutchison shares fell 1.46 per cent yesterday, while Cheung Kong dropped: 1.48%