There’s nothing like a ray of sunshine in an otherwise gloomy results season. But a six-fold increase in net profit sent Hutchison Whampoa stocks plummeting as everyone lunged for the sell button.
A quick glance at Hutchison Whampoa’s half-year results is breathtaking. Figuratively speaking, of course (if financial results actually take your breath away we suggest you increase your medication).
But sober or stoned, the results are impressive: 630 percent increase in net profit enabling the ports to telecommunications to retail conglomerate to stash almost US$6 billion in the bank.
That is an incredible one billion dollars walk-away profit a month. No wonder they call Asia’s richest man and Hutch boss Li Ka-shing “superman” here in Hong Kong. In a city that worships wealth above all else, women want him, men want to be him. Although at 80-something he is getting on a bit. And what’s with those glasses?
But we digress. The secret behind the half-year bonanza was not a huge increase in business between January and June, but rather a one-off event in March. That was when Hutch spun off its South China port operations into a Singapore business trust, which poured US$5.6 billion into its corporate coffers.
Without the spin off the Hutch results would have been unimpressive. Now, however, the company is awash with cash and in bold expansion mode.
At the results press conference in Hong Kong yesterday, managing director Canning Fok said the company planned to build an additional 35 berths at its ports, 10 of which were already under construction.
Hutchison Port Holdings Trust has its flagship operation in Hong Kong International Terminals, with a huge container terminal operation across the border in Yantian. These two operations move the bulk of the company’s Pearl River Delta cargoes.
While there is no room for expansion at the Hong Kong container port at Kwai Tsing, mainland terminals are not so restricted. Yantian International Container Terminals, a joint venture between HPH Trust and Shenzhen Yantian Port Group, is now responsible for operating and managing Phases I, II and III, as well as an expansion project and the West Port development. In China, if you need to reclaim land to expand a port you just do it.
With all the positive activity and the company buoyant in a sea of liquidity you would have expected the share price to be soaring with the eagles. But you would be wrong.
In response to the record six-fold profit increase, the share price plummeted as soon as the tea lady opened the Hong Kong Exchange office, falling by an incredible seven percent in 40 minutes. It seems that despite Li and Fok’s attempts to gee up shareholders, investor sentiment has been cooled by the state of the global economy that is hammering exports and transport carriers. Everyone is cashing out.
Container shipping has been particularly hard hit, and declining export volumes mean falling throughput and thus falling revenue for ports.
Certainly in Asia’s get-rich-quick style of investing (as close to gambling as sitting at the roulette wheel), stock code 0013 is not one to hang on to long term. Equally unattractive is that after Hutch decided to increase the dividend payout for the first time in 10 years, its long-suffering investors stand to gain the princely sum of US$0.06 per share.