Porperty giant confounds critics

PROPERTY analysts are likely to re-adjust their forecast of the full year results of property giant Cheung Kong (Holdings) after the announcement of its higher than expected interim earnings.

The company yesterday announced interim earnings of $4.47 billion.

The figures represented a 1.4 per cent drop compared with the result over the same period in the preceding year but was much better than the 20 per cent fall made by the market's consensus forecast.

The key area of difference is treasury.

Even though Cheung Kong did not provide a clear breakdown in the interim result, property analysts said Cheung Kong had achieved an investment income of nearly $1 billion.

''That is far beyond our firm's expectation of $500 million,'' said Roger Luk, property analyst at Sassoon Securities.

Another area is the contribution from its associated company, Hutchison Whampoa.

The trading hong yesterday posted an interim earnings of $3.72 billion, 48 per cent higher than market expectations.

Shares in Cheung Kong were expected to rebound in the short term as the stock was under pressure in the past week because of pessimistic predictions about its results.

''We will readjust the earnings forecast in Cheung Kong,'' said Karl Lung, property analyst at W I Carr Far East.

Carr Far East had predicted a 20 per cent drop in Cheung Kong's first half result.

The house has upgraded Cheung Kong's full-year earnings to about $11 billion, representing a 12.46 increase compared with the figures of $978.1 million last year.

But the results were largely dependent on the response to the property sales in several of the company's major developments which were scheduled to go on sale in the second half of this year, said Mr Lung.

''Because of the current market sentiment, we are cautious about the sales response for these properties,'' he said.

Several property developments scheduled to go on sale in the rest of the year include a commercial project, Concordia Plaza in Tsim Sha Tsui, eight blocks of the residential development Laguna City, 31/2 blocks of Kingswood Villas and residential flats in South Horizons.

Sales response to Kingswood Villas and Concordia Plaza would be crucial to earnings growth of the property giant this year, said Mr Luk.

The brokerage firm predicted Cheung Kong would achieve an earnings of $11.13 billion this year provided that all the property developments were sold out.

Mr Luk said it was hard to make an accurate prediction of the company's full year result because of the uncertain market sentiment and the poor disclosure of the firm's treasury investments.

Michael Green, head of Nomura Research Institute's Hong Kong office, described Cheung Kong as a ''very well run company''.

He was optimistic about the sales of Cheung Kong's various developments and speculated the huge commercial building Concordia Plaza would be entirely bought by mainland companies which planned to set up base in Hong Kong.

In view of the low price earnings multiple, Mr Green highly recommended the company.