HUTCHISON WHAMPOA LIMITED (

Transcription

1 9/F, 10 Des Voeux Road Central, Hong Kong. Dealing: Research: Facsimile: HONG KONG RESEARCH Analyst: Sabina Cheng 1 st April, 2010 HUTCHISON WHAMPOA LIMITED ( ) Sector : Conglomerates Chairman : Dr. LI Ka-shing HKSE Code : Market Price : HK$57.50 (01/04/2010) Managing Director : Canning FOK Kin-ning HSI : 21, (01/04/2010) Shares Issued : 4, million Market Cap. : HK$245, million 52-week Hi / Lo : HK$59.60 / HK$37.50 SUMMARY OF THE FINAL RESULTS FOR THE YEAR ENDED 31 ST DECEMBER 2009 Final Results Highlights FY2009 FY2008 HK$ millions HK$ millions Changes Total revenue 300, , % EBIT from established businesses 48,364 62, % LBIT of the 3 Group (5,281) (15,792) -66.6% Total EBIT 43,083 46, % Profit attributable to shareholders 14,168 12, % Earnings per share HK$3.32 HK$ % Final dividend per share HK$1.22 HK$1.22 Unchanged Full-year dividend per share HK$1.73 HK$1.73 Unchanged Hutchison Whampoa ( HWL of the Group ) reported a 11.7% year-on-year rise in profit attributable to shareholders of HK$14.17 billion for the year ended 31 st December 2009, even though its turnover declined by 13.7% year-on-year to HK$ billion. Excluding the profits on property revaluation and disposal of investments, profit attributable to shareholders was at HK$33 million, down 99.4% year-on-year. The group s profits on disposal of investments were amounted to HK$8.83 billion, down 35.8% year-on-year from HK$6.5 billion in FY2008. The Group s share of a profit on Hutchison Telecommunications International s ( HTIL ) entire disposal of Partner Communications in Israel, Cheung Kong Infrastructure s gain on disposal of equity interest in three power plants in Mainland China and HTIL s gain on disposal of telecommunications tower assets in Indonesia amounted to HK$7.39 billion, HK$847 million and HK$592 million, respectively. As of 31 st December 2009, the consolidated net debt of the Group reduced by HK$22.51 billion or 14% to HK$ billion, while cash resources totalled HK$ billion (31 st December 2008:HK$88.02 billion). The net debt-to-net total capital ratio was 29.9% (31 st December 2008: 34.9%). Earnings per share was HK$3.32 (FY2008: HK$2.97). A final DPS of HK$1.22 was declared, bringing the full-year DPS to HK$1.73 per share, same as in FY2008 and payout ratio of 52.1% (FY2008: 58.2%). This report has been prepared solely for information purposes and we are not soliciting any action based upon it. Neither this document nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. The information is based upon information which we consider reliable, but accuracy or completeness is not guaranteed. Opinions expressed herein are subject to change without notice. At time of this report, East Asia Securities Company Limited has no position in securities of the company or companies mentioned herein, while its group companies may from time to time have interests in securities of the company or companies mentioned herein.

2 Breakdown of turnover by business segments: FY2009 FY2008 HK$ million % HK$ million % Change Ports and related services 33, % 39, % -15.6% Property and hotels 13, % 10, % 32.9% Retail 116, % 118, % -2.0% Cheung Kong Infrastructure 14, % 19, % -24.6% Husky Energy 35, % 63, % -43.5% Finance and investments 2, % 4, % -41.6% Hutchison Telecommunications Hong Kong 8, % 7, % 5.6% Hutchison Telecommunications International 11, % 16, % -29.6% Others 6, % 7, % -16.9% Sub-total (established businesses) 242, % 288, % -15.6% Telecommunications 3 Group 57,590 60, % Total revenue 300, , % Breakdown of EBIT/(LBIT) by business segments: FY2009 FY2008 HK$ million % HK$ million % Change Ports and related services 10, % 13, % -21.4% Property and hotels 6, % 8, % -20.5% Retail 5, % 4, % 29.8% Cheung Kong Infrastructure 6, % 7, % -6.7% Husky Energy 4, % 13, % -69.9% Finance, investments and others 4, % 6, % -36.9% Hutchison Telecommunications Hong Kong % % 31.3% Hutchison Telecommunications International (199) -0.5% 2, % % Others (145) -0.4% (791) -1.4% -81.7% Sub-total (established businesses) 37, % 55, % -31.6% Telecommunications - 3 Group (5,281) (15,792) -66.6% Change in fair value of investment prop 1, % Profit on disposal of investments & others 8,831 6, % Total 43,083 46, % Revenue from ports and related services dropped by 15.6% year-on-year to HK$33.43 billion due to the sharp reduction in global trade volume and lower average tariffs. The combined container throughput was down by 3% year-on-year to 65.3 million twenty-foot equivalent units ( TEUs ). EBIT of the segment fell by 21.4% year-on-year to HK$10.41 billion, accounting for 27.5% of the total profit contribution from HWL s established businesses. Revenue from the property and hotels division increased 32.9% year-on-year to HK$13.91 billion, while EBIT fell by 20.5% year-on-year to HK$6.43 billion. Gross rental income amounted to HK$3.79 billion, up 11% year-on-year, with 97% occupancy for its rental properties. Property development profits for the year were 50% higher than last year mainly due to the completion and sale of property units in various projects. This strong performance was partially offset by weakness in the hotel operations, which reported sharply lower profits in 2009 mainly due to the adverse impact of swine flue and the economic downturn. This division s total EBIT decreased 20.5% to HK$6.43 billion. Excluding the non-recurring profit of HK$2.14 billion realised in 2008 on the disposal of an investment property, EBIT for the division increased 8% in

3 The retail division reported a turnover decline of 2% year-on-year to HK$ billion and EBIT of the segment rose by 29.8% year-on-year to HK$5.69 billion. Despite weaker retail turnover, EBIT increased by 30% to HK$5.69 billion due to continued improvement in the division s cost structure, operational efficiency and cautious expansion strategy. Cheung Kong Infrastructure contributed 6.2% and 18.2% respectively to HWL s turnover and EBIT. Total turnover fell to HK$14.98 billion while EBIT dropped to HK$6.91 billion, down 24.6% and 6.7% year-on-year respectively. The drop in turnover was due to the disposal of its 45% equity interest in three power plants in the Mainland to Hong Kong Electric Holdings. HWL s associated company-husky Energy reported a 69.9% year-on-year drop in FY2009 EBIT to HK$4.01 billion with turnover of HK$35.81 billion on lower total production volume. Husky contributed 14.7% and 10.6% respectively to HWL s turnover and EBIT. EBIT from Finance and investments totalled HK$4.08 billion, down 36.9% year-on-year, mainly due to lower market interest rates. During the year, the Group refinanced and repaid debts as they matured and repaid early certain other long-term borrowings and notes totalling HK$ billion. This refinancing activity significantly extended the maturity profile of the Group s long-term debts. Hutchison Telecommunications Hong Kong ( HTHKH ) contributed 3.5% and 1.8% respectively to HWL s turnover and established-businesses EBIT. HTHKH s FY2009 turnover was HK$8.45 billion, a 5.6% year-on-year increase whilst its EBIT was HK$692 million, up 31.3% yearon-year. Hutchison Telecommunications International ( HTIL ) contributed 4.8% to HWL s turnover of HK$11.75 billion. A LBIT of HK$199 million was registered, compared with the EBIT of HK$2.73 billion in As at 31 st December 2009, HTIL had a mobile customer base of 12.8 million, a 98% increase over the comparable base last year. 3 Group: o The 3 Group reported LBIT of HK$5.28 billion, a 67% reduction compared with the LBIT of HK$15.79 billion in The significant drop in the LBIT was due to its growth in customer base, effective costs control and reduction of amortisation costs following an indefinite extension of the telecommunications licenses of 3 Italia and 3 UK. Outlook & Prospect o The Group s registered 3G customer base increased 29% year-on-year in 2009 with over 26.8 million customers. Its mobile broadband access customers jumped 75% year-onyear to 4.5 million. However, average revenue per active user declined by 15% year-onyear to 28.32, reflecting increasing price competition and reduction in roaming rate in certain markets. 3G business: Management targets to have an EBIT breakeven in FY2010. This may be achievable on the Group s 3G EBITDA growth, cost reduction following the network sharing agreements and lower customer acquisition cost. Meanwhile, we see a potential capex overhang following the Group s intention to make a bid for any of the upcoming 4G licenses in the UK. Retail division is expected to continue to do well in FY2010. Management targets retail division to achieve HK$10 billion EBIT in three years time (2009: HK$5.69 billion). This division reported EBIT margin of 4.9% in FY2009 which is below the Group s ideal level of 8%, representing a 3

4 potential improvement for some three percentage points. We see this division s continuous efforts in its cost control and prudent expansion strategy can help narrow the gap. Ports division: This division is believed to have a recovery in FY2010 driven by growth in volume on a global recovery. The Chairman of HWL has been repurchasing his own shares since October It signals the shares maybe undervalued from the Chairman s point of view. It is estimated that the Chairman currently has some 51.9% interest in HWL (including Cheung Kong s equity interest in HWL). Valuation: Hutchison s shares are trading at a fair valuation of 27% discount to its NAV, 16x FY2010F P/E and 3% dividend yield. Upside risks include an unexpected major group restructuring, its 3G business achieving positive EBIT earlier than expected, and its port throughput improvement. Downside risks include a weaker-than-expected global economic recovery and any weaker-than-expected 3G performance in UK and Italy. Recommendation: Buy 4

5 This document is published by East Asia Securities Company Limited, a wholly-owned subsidiary of The Bank of East Asia, Limited (BEA). The research analyst primarily responsible for the content of this report, in part or in whole certifies that the views on the companies and their securities mentioned in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. This report has been prepared solely for information purposes and has no intention whatsoever to solicit any action based upon it. Neither this report nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. The information is based upon information, which East Asia Securities Company Limited considers reliable, but accuracy or completeness is not guaranteed. Information and opinions expressed herein reflect a judgment as of the date of this document and are subject to change without notice. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is not to be taken in substitution for the exercise of judgment by respective readers of this report, who should obtain separate legal or financial advice. East Asia Securities Company Limited and / or The BEA Group accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or further communication given in relation to this report. At time of this report, East Asia Securities Company Limited has no position in securities of the company or companies mentioned herein the report, while BEA along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this report. BEA and its associates, its directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. BEA and/or any of its affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company or companies mentioned in this report and may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company or companies mentioned in the report. This document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or other jurisdiction, publication, availability or use would be contrary to law and regulation. 5