Conglomerate First Pacific has rung up impressive gains this year as expectations of windfall profits from its telecoms division have powered the stock. The counter's recent inclusion in the Hang Seng Index has given it an extra charge, and it set a record high last week. The stock has outperformed the Hang Seng Index by 110 per cent over the past two years and has risen 11 per cent since the HSI Services announced in July that the stock would join the Hang Seng Index. But a slow down of profit booked from the group's property projects could provide an earnings disappointment in today's interim results, analysts say, and some speculate the share has now reached fair value. UBS Securities conglomerates analyst Christopher Wilmot said: 'I would be surprised to see them outperform much further after the run they have had since the end of last year.' First Pacific, controlled by the Indonesian Salim group, has interests covering telecommunications, property, marketing and distribution, and banking. The strength of the shares has been based mainly on the expectation of earnings from its telecom division and on the company's open management style. Analysts say regional telecommunications will be the company's key earnings driver over the next several years. Its Pacific Link unit in Hong Kong, recently awarded a personal communications network licence, will deliver an 'earnings explosion', one analyst said. The company is also likely to receive increasing returns from Smart Communications in the Philippines, Escotel in India, and Indolink in Indonesia. Nomura Research Institute analyst Rebecca Woo said: 'These investments are made in the emerging markets of Asia, which should have amongst the highest GDP growth in the world over the next two years.' First Pacific's other success is its ability to overcome a record of poor management, disparate businesses and lack of reliability, a success evidenced by its growing institutional following. Nikko Securities senior institutional sales manager Kent Rossiter said: 'First Pacific now has one of the most open managements and there is definitely not a problem with liquidity - both are important for institutional investors.' Another strength is its regional exposure, which cushions any single country downturn. Balancing out these features is that it has risen so far, while a demanding valuation means earnings must grow steadily. A slowdown in booking profits over the six months to June, in the absence of exceptional gains, is likely to see net profit growth slip. Analysts tip profit to fall by as much as 22 per cent for the year to December. There is concern about impact on earnings per share caused by First Pacific's global offering of 223 million new shares last year, raising $1.78 billion. Another danger is that the group may be taking too much on at once. Vickers Ballas Securities research director Andrew Fernow said: 'The management may get a little ahead of itself in financing these projects, particularly telecoms projects in India, and the Philippines. 'The pay back for these projects is fairly long.' While the rapid rise in the new index constituent is likely to flatten, most houses are still calling the group's long-term future attractive.