Hutchison Whampoa (HKG:13)

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==== Retail (38% of revenue in 2009) ==== ==== Retail (38% of revenue in 2009) ====
-* Hutchison's retail arm is AS Watson & Co., Limited, the world's largest health and beauty retailer; it operates over 8,900 retail stores in 31 countries. In 2009, the retail business generated 39% of the Hutchison's HK$300 billion in revenue. In 2008, AS Watson's revenue increased by 8%, although two of its health retailer subsidiaries, Superdrug and Savers, both reported losses.<ref>{{cite web|url=http://www.igd.com/analysis/channel/news_hub.asp?channelid=1&channelitemid=185|title=AS Watson News| accessdate= 6 Sept, 2010|author= IGD Retail Analysis}}</ref>+* Hutchison's retail arm is AS Watson & Co., Limited, the world's largest health and beauty retailer; it operates over 8,900 retail stores in 31 countries. In 2009, the retail business generated 39% of the Hutchison's HK$300 billion in revenue. In 2008, AS Watson's revenue increased by 8%, although two of its [[Health_%26_Wellness|health]] retailer subsidiaries, Superdrug and Savers, both reported losses.<ref>{{cite web|url=http://www.igd.com/analysis/channel/news_hub.asp?channelid=1&channelitemid=185|title=AS Watson News| accessdate= 6 Sept, 2010|author= IGD Retail Analysis}}</ref>
[[Image:HWLPicture4.png|frame|left|Telecommunications Revenue by Sub-Segments]] [[Image:HWLPicture4.png|frame|left|Telecommunications Revenue by Sub-Segments]]
[[Image:HWLPicture5.png|frame|left|Energy, Infrastructure, and Investments Revenue by Sub-segments]] [[Image:HWLPicture5.png|frame|left|Energy, Infrastructure, and Investments Revenue by Sub-segments]]
-* Like Hutchison's port operations, AS Watson is poised to benefit from improvements in the global economy and China's economic resilience. It has reduced costs by pressuring suppliers with Hutchison's large purchasing power, resulting in more profitable margins in the retail division going forward.<ref>{{cite web|url=http://online.wsj.com/article/SB10001424052748704723604575378633012278478.html?mod=googlenews_wsj|title=Hutchison Has Potential to be a Cash Cow|accessdate= 6 Sept, 2010|author= Rick Carew, The New York Times|date=20 Jul, 2010}}</ref> The firm has been expanding its high-end brand presence in China; in November 2009, AS Watson opened its 500th store in China. The retail franchise also has an ambitious expansion plan to open 10,000 stores by 2011, representing two new stores a day throughout the year.<ref>{{cite web|url=http://en.prccn.com/WenzhangInfor.aspx?id=988|title=AS Watson opens 500th store in China, accelerates global expansion plan|accessdate=6 Sept, 2010|author=China International Beauty Net}}</ref>+* Like Hutchison's port operations, AS Watson is poised to benefit from improvements in the global economy and China's economic resilience. It has reduced costs by pressuring suppliers with Hutchison's large purchasing power, resulting in more profitable margins in the retail division going forward.<ref>{{cite web|url=http://online.wsj.com/article/SB10001424052748704723604575378633012278478.html?mod=googlenews_wsj|title=Hutchison Has Potential to be a Cash Cow|accessdate= 6 Sept, 2010|author= Rick Carew, The New York Times|date=20 Jul, 2010}}</ref> The firm has been expanding its [[Luxury_Consumption_in_China|high-end brand presence in China]]; in November 2009, AS Watson opened its 500th store in China. The retail franchise also has an ambitious expansion plan to open 10,000 stores by 2011, representing two new stores a day throughout the year.<ref>{{cite web|url=http://en.prccn.com/WenzhangInfor.aspx?id=988|title=AS Watson opens 500th store in China, accelerates global expansion plan|accessdate=6 Sept, 2010|author=China International Beauty Net}}</ref>
==== Telecommunications (26% of revenue in 2009) ==== ==== Telecommunications (26% of revenue in 2009) ====
-* Hutchison was one of the first operators to introduce [[3G|3G]] multi-media mobile telephony services, and it offers high-speed wireless services to a 3G customer base of over 27.8 million in Europe and Australia. It also provides GSM mobile phone systems, fixed-line services, fiber optic broadband networks, and radio broadcasting. Mobile TV is a niche service that has become more popular particularly in Europe and the United States; Hutchison owns 3 Italia, the largest mobile TV broadcaster in Europe, with 800,000 customers. <ref>{{cite web |url= http://www.nytimes.com/2008/05/05/business/media/05mobile.html?_r=1&ref=hutchison-whampoa-ltd|title= Mobile TV Spreading in Europe and to the U.S.|accessdate= 5 Sept, 2010 |author= Kevin J. O'Brien, The New York Times|date= 5 May, 2008}}</ref>+* Hutchison was one of the first operators to introduce [[3G|3G]] multi-media mobile telephony services, and it offers high-speed wireless services to a 3G customer base of over 27.8 million in Europe and Australia. It also provides GSM mobile phone systems, [[Fixed-line_telecommunication|fixed-line services]], fiber optic broadband networks, and radio broadcasting. Mobile TV is a niche service that has become more popular particularly in Europe and the United States; Hutchison owns 3 Italia, the largest mobile TV broadcaster in Europe, with 800,000 customers. <ref>{{cite web |url= http://www.nytimes.com/2008/05/05/business/media/05mobile.html?_r=1&ref=hutchison-whampoa-ltd|title= Mobile TV Spreading in Europe and to the U.S.|accessdate= 5 Sept, 2010 |author= Kevin J. O'Brien, The New York Times|date= 5 May, 2008}}</ref>
* Started in 2003, the 3G telecommunications division of Hutchison has been the most disadvantageous influence on Hutchison's stock shares. In 2009, the business lost HK$9 billion; analysts forecast a smaller loss of HK$1.2 billion in 2010.<ref>{{cite web|url=http://online.wsj.com/article/SB10001424052748704723604575378633012278478.html?mod=googlenews_wsj|title=Hutchison Has Potential to be a Cash Cow|accessdate= 6 Sept, 2010|author= Rick Carew, The New York Times|date=20 Jul, 2010}}</ref> But while Hutchison's dividend payout of HK$1.73 has not changed since 2001, analysts suggest that improvements in Hutchison's 3G telecommunications business could instigate as much as a 40% cumulative growth in dividends through 2013.<ref>{{cite web|url=http://online.wsj.com/article/SB10001424052748704723604575378633012278478.html?mod=googlenews_wsj|title=Hutchison Has Potential to be a Cash Cow|accessdate= 6 Sept, 2010|author= Rick Carew, The New York Times|date=20 Jul, 2010}}</ref> * Started in 2003, the 3G telecommunications division of Hutchison has been the most disadvantageous influence on Hutchison's stock shares. In 2009, the business lost HK$9 billion; analysts forecast a smaller loss of HK$1.2 billion in 2010.<ref>{{cite web|url=http://online.wsj.com/article/SB10001424052748704723604575378633012278478.html?mod=googlenews_wsj|title=Hutchison Has Potential to be a Cash Cow|accessdate= 6 Sept, 2010|author= Rick Carew, The New York Times|date=20 Jul, 2010}}</ref> But while Hutchison's dividend payout of HK$1.73 has not changed since 2001, analysts suggest that improvements in Hutchison's 3G telecommunications business could instigate as much as a 40% cumulative growth in dividends through 2013.<ref>{{cite web|url=http://online.wsj.com/article/SB10001424052748704723604575378633012278478.html?mod=googlenews_wsj|title=Hutchison Has Potential to be a Cash Cow|accessdate= 6 Sept, 2010|author= Rick Carew, The New York Times|date=20 Jul, 2010}}</ref>

Revision as of 13:55, September 7, 2010


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Hutchison Whampoa, Limited (HKG:13) is an industrial conglomerate with retail, property, energy, infrastructure, and telecommunication operations in 57 countries. It is owned by Hong Kong tycoon Mr. Ka-shing Li.

Company Overview

Business and Financial Metrics

While analysts expected the company to report six-month earnings (ending on June 30, 2010) below 10 billion Hong Kong dollars, the net income for the six months was 10.69 billion HK dollars. It surpassed expectations due to more income in its energy and port divisions and less loss in its telecommunications department. [1]

A figure of HWL's earnings and dividends per share over the years.
A figure of HWL's earnings and dividends per share over the years.
2009 Total Revenue by Segment (Segment; Revenue in HK$ millions; Percentage)
2009 Total Revenue by Segment (Segment; Revenue in HK$ millions; Percentage)
2009 Total Revenue and Number of Businesses by Segment
2009 Total Revenue and Number of Businesses by Segment

Business Segments

Hutchison Whampoa Limited consists of five business segments, which handle the various interests of Hutchison. [2]

Retail (38% of revenue in 2009)

  • Hutchison's retail arm is AS Watson & Co., Limited, the world's largest health and beauty retailer; it operates over 8,900 retail stores in 31 countries. In 2009, the retail business generated 39% of the Hutchison's HK$300 billion in revenue. In 2008, AS Watson's revenue increased by 8%, although two of its health retailer subsidiaries, Superdrug and Savers, both reported losses.[3]
Telecommunications Revenue by Sub-Segments
Telecommunications Revenue by Sub-Segments
Energy, Infrastructure, and Investments Revenue by Sub-segments
Energy, Infrastructure, and Investments Revenue by Sub-segments
  • Like Hutchison's port operations, AS Watson is poised to benefit from improvements in the global economy and China's economic resilience. It has reduced costs by pressuring suppliers with Hutchison's large purchasing power, resulting in more profitable margins in the retail division going forward.[4] The firm has been expanding its high-end brand presence in China; in November 2009, AS Watson opened its 500th store in China. The retail franchise also has an ambitious expansion plan to open 10,000 stores by 2011, representing two new stores a day throughout the year.[5]

Telecommunications (26% of revenue in 2009)

  • Hutchison was one of the first operators to introduce 3G multi-media mobile telephony services, and it offers high-speed wireless services to a 3G customer base of over 27.8 million in Europe and Australia. It also provides GSM mobile phone systems, fixed-line services, fiber optic broadband networks, and radio broadcasting. Mobile TV is a niche service that has become more popular particularly in Europe and the United States; Hutchison owns 3 Italia, the largest mobile TV broadcaster in Europe, with 800,000 customers. [6]
  • Started in 2003, the 3G telecommunications division of Hutchison has been the most disadvantageous influence on Hutchison's stock shares. In 2009, the business lost HK$9 billion; analysts forecast a smaller loss of HK$1.2 billion in 2010.[7] But while Hutchison's dividend payout of HK$1.73 has not changed since 2001, analysts suggest that improvements in Hutchison's 3G telecommunications business could instigate as much as a 40% cumulative growth in dividends through 2013.[8]

Energy, Infrastructure, Investments (18% of revenue in 2009)

  • Hutchison's infrastructure arm, Cheung Kong Infrastructure Holdings Ltd, operates businesses in transportation, energy, infrastructure materials, and water plants. Hutchison has an interest in UK energy company Northern Gas Networks Ltd and in Hongkong Electric Holdings (HEH), which is the sole electricity suppler to Hong Kong Island and Lamma Island.
  • Hutchison is a major shareholder of Husky Energy, one of Canada's largest energy companies. On September 1, 2010, Husky Energy acquired 160,000 acres of natural gas properties in west central Alberta.[9] This addition will provide Husky with more than 65 million cubic feet per day of natural gas production. In July 2010, Cheung Kong Infrastructure offered 5.8 billion pounds ($9.1 billion) to purchase Electricite de France's power networks in the United Kingdom[10]; the well-regulated electricity businesses in the UK and Australia offer stable returns.

Ports and Related Services (11% of revenue in 2009)

  • Hutchison Port Holdings (HPH) is a port developer and operator with 51 ports in 25 countries. It is headquartered in the Port of Hong Kong, which was ranked in 2008 as the world's third busiest port in terms of container traffic.[11] Hutchison also operates the Port of Felixstowe, which in 2008 handled the most container traffic the United Kingdom.[12] From 1994 to 2008, the throughput (or amount of cargo processed and handled) of HPH has increased every year, growing from 6.6 to 67.6 millions of twenty-foot equivalent units (TEUs).[13] In 2009, the throughput of Hutchison's ports decreased to 65.3 million TEUs.
  • There is growing containerization of world trade; in particular, Europe-Asia container traffic experienced a 35% surge[14] in eastbound traffic to Asia in 2010. HPH's holding in the Port of Hong Kong is therefore strategic relative to the main origins and final destinations of container traffic. In the first-half reports ending June 30, 2010, HPH reported a 35%[15] gain in profits. Second to the importance of location, port productivity is the main factor[16] influencing the economics of containerization; the speed of ship turnarounds are determined by adequate terminal facilities (such as cranes, storage areas, and computer monitoring). For example, Hutchison employs automated stacking cranes, GPS inventorization of the storage yard, and an open-platform terminal-management system called nGen.[17] The China Ports Association awarded Hutchison for the best vessel productivity from 2003 to 2005.[18]

Property and Hotels (5% of revenue in 2009)

  • As of August 2010, Hutchison Whampoa Properties Limited (the property and investment arm of HWL) owns property developments in 17 cities in Mainland China, and it has overseen the development of over 50 hotels and property projects. Hutchison's Harbour Plaza Hotels & Resorts cater to an upscale audience and operate close to 12,000 rooms in Hong Kong, Mainland China, and the Bahamas; among the 300 international hotel groups at the Guangdong International Tourism 2009 Star Hotels Show, the Harbor Plaza 8 Degrees received the "Best Designer Hotel" award.[19]
  • The property investment market in Hong Kong depends on changes in government regulation and the performance of the economy. Analysts say that property prices in Hong Kong will not be affected by the increased stamp duty effective April 2010.[20] Low borrowing costs, however, have led home prices in Hong Kong to increase by 7.4% in 2010.[21] In terms of overseas interests, Hutchison looks mainly to the United States and the Bahamas.[22]

Key Trends and Forces

Company's Directors Buy Shares, Stock Prices Rise

On August 10, 2010, Mr. Li Ka-Shing purchased his largest purchase since January 2003: 5.9 million Hutchison shares at HK$59.35. [23] On August 11, 2010, shares of Hutchison jumped 8%, a two-year high, to HK$63.10, surpassing a 0.31% rise in Hong Kong's Hang Seng Index.[24] On August 13, 2010, whereas the Hang Seng Property Index showed a severe steep 0.7% drop, Hutchison Whampoa advanced 2.6% to HK$62.85.[25]

Growth of Hong Kong Economy

The Hong Kong Association of Banks stated that Hong Kong will receive approximately 14.70 billion US dollars in yuan-denominated bank deposits in 2010. [26]This increases Hong Kong's dominance as a center of Chinese currency, benefiting businesses centered in Hong Kong.

Competition

  • According to Goldman Sachs estimates, Hutchison's shares trade around 14.7 times expecting earnings in 2010 and 9.8 times expected earnings in 2011; Hutchison also trades at approximately a 40% discount to its net asset value.[27] These measures are cheaper than those of rival conglomerates Swire Pacific Ltd. and Wharf Holdings Ltd.
  • Furthermore, investment by state-controlled companies in China has been driven by hundreds of billions of dollars in government spending; state lending to combat the financial crisis has centered on state enterprises, not private corporations.[28]

References

  1. The Associated Press, The New York Times (22 Aug, 2010). World Business Briefing: Hutchison Profit. Retrieved on 5 Sept, 2010.
  2. Overview of Hutchison Whampoa. Retrieved on 5 Sept, 2010.
  3. IGD Retail Analysis. AS Watson News. Retrieved on 6 Sept, 2010.
  4. Rick Carew, The New York Times (20 Jul, 2010). Hutchison Has Potential to be a Cash Cow. Retrieved on 6 Sept, 2010.
  5. China International Beauty Net. AS Watson opens 500th store in China, accelerates global expansion plan. Retrieved on 6 Sept, 2010.
  6. Kevin J. O'Brien, The New York Times (5 May, 2008). Mobile TV Spreading in Europe and to the U.S.. Retrieved on 5 Sept, 2010.
  7. Rick Carew, The New York Times (20 Jul, 2010). Hutchison Has Potential to be a Cash Cow. Retrieved on 6 Sept, 2010.
  8. Rick Carew, The New York Times (20 Jul, 2010). Hutchison Has Potential to be a Cash Cow. Retrieved on 6 Sept, 2010.
  9. Husky Energy Acquires Foothills Natural Gas Properties (1 Sept, 2010). Retrieved on 5 Sept, 2010.
  10. Eastday (31 Jul, 2010). Li Ka-shing buys EDF arm for $9.1b. Retrieved on 6 Sept, 2010.
  11. American Association of Port Authorities. Port Industry Statistics. Retrieved on 6 Sept, 2010.
  12. American Association of Port Authorities. Port Industry Statistics. Retrieved on 6 Sept, 2010.
  13. Hutchinson Port Holdings. HPH Throughput. Retrieved on 6 Sept, 2010.
  14. Bruce Barnard, The Journal of Commerce (10 Mar, 2010). Asia-Europe Container Cargo Soars. Retrieved on 6 Sept, 2010.
  15. Kelvin Wong, et al. of Bloomberg Businessweek (6 Aug, 2010). Li’s Hutchison, Cheung Kong Surge After Profits Rise.
  16. Kevin Cullinane and Mahim Khannab (22 Jun, 2010). Economies of scale in large containerships: optimal size and geographical implications. Retrieved on 6 Sept, 2010.
  17. Hutchison Port Holdings. Innovation. Retrieved on 6 Sept, 2010.
  18. Hutchison Port Holdings. Awards. Retrieved on 6 Sept, 2010.
  19. Luxe Worldwide Hotels Blog. Harbour Plaza 8 Degrees awarded The Best Designer Hotel 2009. Retrieved on 6 Sept, 2010.
  20. Anna Kitanaka, Bloomberg Businessweek. Hong Kong Stamp Duty Effect Limited, Taifook Says. Retrieved on 6 Sept, 2010.
  21. Centadata. Centa-City Leading Index. Retrieved on 6 Sept, 2010.
  22. Hutchison Whampoa Limited. Property Development. Retrieved on 5 Sept, 2010.
  23. Hanny Wan and Kana Nishizawa, Bloomberg (13 August, 2010). Hong Kong Stocks Fluctuate; Developers Retreat on Property Policy Report. Retrieved on 5 Sept, 2010.
  24. Reuters (11 August, 2010). Hutchison up 8% after directors buy shares. Retrieved on 5 Sept, 2010.
  25. Xinhua News Agency (11 August, 2010). News items from Asia-Pacific Desk of Xinhua. Retrieved on 5 Sept, 2010.
  26. 8 August, 2010. Hong Kong yuan deposits 'to hit 14.7 bln US dollars'. Retrieved on 5 Sept, 2010.
  27. Rick Carew, The New York Times (20 Jul, 2010). Hutchison Has Potential to be a Cash Cow. Retrieved on 6 Sept, 2010.
  28. Michael Wines, The New York Times (29 Aug, 2010). China Fortifies State Businesses to Fuel Growth. Retrieved on 6 Sept, 2010.
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