WHEELOCK and Co is a blue chip with a lot of vision but, to date, it has achieved few results. The company reported on Thursday profits at the high end of expectations at $1.5 billion, up 42 per cent for the six months ended September 30 in results propped up by exceptionals. After stripping out the swapping around of assets between Wheelock and sister company Wharf (Holdings), DBS Securities estimates the net profit would have been $693 million, down 30 per cent on the previous period. The asset swaps generated huge exceptional gains that helped to dress up profits. Wheelock is the parent of a group of companies brought into the world in their present form by the shipping magnate, the late Sir Yue-kong Pao. In a series of takeovers in the early 1980s Sir Y.K. bought Wheelock Marden, later named World International, along with the Hongkong & Kowloon Wharf & Godown Co, now called Wharf. The group lay relatively still until 1990. Revitalisation began at Wharf with the group getting its communications act together, resulting in significant rerating of the group in the period 1991 to 1992. Revitalisation of the parent began in 1993 with a name change to Wheelock. There was a short period of outperformance relative to the Hang Seng Index followed by relative underperformance and mediocrity. Until May 1993, the stock tracked the Hang Seng Index like a bloodhound. The period of outperformance that followed the name change helped the stock return 217 per cent over four years, or 30 per cent a year with a relative outperformance against the index of 14 per cent. Since December 1993, things have not gone Wheelock's way. The stock has fallen 41 per cent and underperformed the index by 24 per cent. Since December last year the stock has risen nine per cent, underperforming the index by 13 per cent. So what went wrong? The problem at Wheelock was expectations were created among investors that were not achieved. Part of the problem was economic as the group set some big goals just as the biggest downturn in a decade in Hong Kong and China was about to happen. Another problem was the management was unrealistic in setting its goals. The corporate vision at the time of the name change was the re-emergence of Wheelock as a major trading hong with a diverse earnings base and a wide range of business activities. The idea was to work on synergising its Asian experience and eye for opportunities with a new series of partners keen to get a slice of the action in the region. A series of deals was announced with Foster's in brewing, retailing with Virgin, paper products with Climax, and investment banking with NatWest. None of these deals have got very far, most are probably loss-making and any contribution to profit that is coming through is a drop in the ocean compared with the earnings flow from the group's traditional source. On reflection, these ties look pretty uninspiring as they tend to be in industries where the competition is tough and margins get hammered. Wheelock has failed to get itself effectively rerated as an active trading hong. It doggedly remains rated as an investment holding company, trading at about 15 per cent discount to appraised net asset value, analysts say. Baring Securities estimates 58 per cent of the group's profits this year will come from Wharf. By comparison, in 1988 Wharf kicked in 60.5 per cent of operating profits - indicating not much has changed. Wharf's contribution is set to decline overall to about 36.5 per cent or $1.84 billion by 1998 of the total forecast pre-tax total of $4.88 billion. The property component to earnings is not expected to change though, as New Asia Realty and Trust - formerly Hongkong Realty and Trust Co - is due to kick in 54 per cent of earnings with $2.6 billion of contribution. Property, through Wharf and New Asia Realty, remains the main driver in earnings and this is not expected to change in the foreseeable future. Wheelock's prospective price-earnings ratio looks relatively cheap about 10.5 times earnings to March 31, 1996. Brokers warn this is deceptive. On stripping out exceptionals, and some of the benefits of the Wharf-New Asia Realty asset swap, Wheelock's PE rises to a relatively pricey 15.5 times. The company remains a core holding but is probably set to continue underperforming the index.