Hutchison to post record profit on spin-off gains

By Donny Kwok

HONG KONG (Reuters) - Hutchison Whampoa Ltd <0013.HK>, Hong Kong billionaire Li Ka-shing's flagship ports-to-telecoms company, is set to post a record high first-half net profit, thanks in part to hefty one-off gains from the spin-off of its port assets.

Stronger income from its energy, retail, infrastructure and 3G businesses would also combine to drive its interim earnings up by nearly eightfold from HK$6.45 billion profit it booked for the year-earlier period, analysts said.

Hutchsion, Asia's top conglomerate by market capitalization and an associate of property developer Cheung Kong (Holdings) Ltd <0001.HK>, is due to announce its earnings for the first six months of 2011 on Thursday.

Hutchison, whose businesses include telecoms operator 3 and Watsons retail stores, is expected to post a net profit of HK$51.2 billion ($6.58 billion) for the first half, including one-off gains of about HK$43 billion, according to average forecast by 10 analysts surveyed by Thomson Reuters. The forecasts for its interim earnings ranged from HK$49.8 billion to HK$54 billion, including exceptional gains estimated at between HK$42 billion and HK$45.1 billion, the survey showed.

Most of the exceptional gains would come from the spin-off of its southern China ports operation through the $5.5 billion listing of Hutchison Port Holdings Trust <HPHT.SI> this year, analysts said.

The listing of Hui Xian Real Estate Investment Trust <87001.HK> that raised $1.6 billion also brought about some one-off gains to Hutchison.

Excluding the exceptional gains, Hutchison's core profit for the first half is expected to reach about HK$7.6 billion.

"Apart from strong earnings, we are hoping to see a higher (interim) dividend," said Patrick Yiu, a director at CASH Asset Management. "We hope that it (dividend increase) is not a one-off increase, but the beginning of a higher dividend payout to reward shareholders," Yiu added.

Hutchison has been distributing an interim dividend of HK$0.51 per share since 2000. It increased its full-year dividend to HK$1.92 last year from HK$1.73 for the past decade.

3G TO SHINE

Hutchison's third-generation (3G) telecom business, which had been losing money over the past decade but broke even in the second half of 2010, recovered further this year and is expected to contribute to the conglomerate's profits from 2011.

"We will look for hints on potentially stronger contribution from its 3G," said William Lo, analyst at Ample Capital Ltd. "The market would like to see if the contribution can increase substantially in future."

Citi said in a research note that the 3G business would generate an EBIT (earnings before interest and tax) of HK$1.3 billion during the first half against LBIT (losses before interest and tax) of HK$2 billion a year ago.

Hutchison's telecoms business 3 Group includes 3G network operations in Britain, Italy, Australia and other countries. It competes with Britain's biggest mobile operator, Everything Everywhere -- a joint venture of France Telecom's <FTE.PA> Orange and Deutsche Telekom's <DTEGn.DE> T-Mobile. It also competes with Telefonica's <TEF.MC> O2 and Vodafone <VOD.L>.

The conglomerate's first half earnings would also benefit from stronger performances at its retail, energy and infrastructure divisions.

Retail, property and Cheung Kong Infrastructure (CKI) <1038.HK> each accounted for about 20 percent of its total EBIT in 2010, with the rest mainly from Husky Energy Inc <HSE.TO> and its port division.

Husky, which is expected to seek a secondary listing in Hong Kong, last week reported a higher-than-expected second-quarter profit. It earned C$669 million ($709.0 million) in the second quarter compared with C$179 million a year earlier.

Hutchison unit CKI last week posted a 96 percent rise in its first half net profit, outstripping expectations, after stellar gains in its newly acquired UK operations.

On Tuesday, a consortium comprised of CKI, Cheung Kong (Holdings) and another unit controlled by Li Ka-shing agreed to buy British utility Northumbrian Water Group <NWG.L> for 2.4 billion pounds ($3.9 billion) in the biggest takeover this year of a British-listed company, as Li continued to expand his business empire by buying utility assets in developed countries.

Hutchison shares had gained about 13 percent so far this year compared with a 4.5 percent fall in the benchmark Hang Seng Index <.HSI> during the period.

($1 = HK$7.79)

(Additional reporting by Joy Leung and Zoey Zhang; Editing by Charlie Zhu and Jacqueline Wong)