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SCMP Reporter

ANALYSTS were surprisingly ambivalent about Hutchison Whampoa's five per cent decline in net profit to $3.17 billion yesterday.

  This is something of a contrast with six months ago when the securities industry and corporate Hongkong was shocked by the announcement of the $1.42 billion provision at Hutchison.

  A torrent of questions from investors in the wake of the announcement placed the company under the spotlight.

  Things came to a climax in autumn when Hutchison was obliged to re-confirm its commitment to the development of UK telecommunications.

  Not much has changed since then, and just as many questions remain unanswered.

  What has changed is the view of Hutchison taken by the institutional investor.

  Following the interim loss announcement, there was a definite and damaging breakdown in communication with investors that still needs the attention of the leading executives at Hutchison and Cheung Kong.

  Key to any change in the attitude of institutions towards the company will be its ability to explain how it will cover the forecast earnings gap approaching in 1995.

  Analysts say this comes at a time when the actual costs of the UK Personal Communications Network will be rising.

   Group managing director Simon Murray says the main costs of the UK telecom investment will fall over the next two years.

  The loss of development profits at Hutchison in 1995, is expected to leave at least a 25 per cent hole in the profit picture in that year.

  Mr Murray is suggesting this can be made up.

   Last year rental income was $650 million; it rose 23 per cent to $800 million in 1992 and is expected to rise by at least 25 per cent in 1993 to take it ''comfortably over $1 billion''.

  Mr Murray is expecting retailing, mainly Watson's and Park'N Shop, to kick in $1 billion a year by 1995 compared with analysts' forecasts of a $500 million contribution in 1992.

  Hongkong International Terminals still sees growth in throughput and this will continue with the bringing on of Terminal 8 this year.

  Meanwhile the group will continue to benefit from the increased earnings exposure to Hongkong Electric.

  Growth in rental income from property development, the increasing exposure of the group to China, and continued profit flow from container terminal services, retail services and Hongkong telecommunications are all encouraging.

  However, in the minds of many analysts the earnings gap in 1995 is not sufficiently covered.

  With Husky Oil sufficiently written down for now, the UK telecoms spending programme spelt out and the rationalisation of overseas telecoms elsewhere completed, the earnings gap remains the final area of doubt in the minds of investors.

  The management may not be able to answer all the questions in relation to this just yet, although Mr Murray remains gung ho about his company's prospects.

  For the company to avoid another period of intense image-damaging speculation, which has the added pain of hurting the share price, increased disclosure of corporate activities in all areas at regular and timely intervals would be helpful.

  - GARETH HEWETT 



A little openness could help Hutchison's image