Wharf (HLDGS) (HKG:4)

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TOP CONTRIBUTORS

The Wharf Holdings Limited (HKG: 0004) is a Hong Kong-based investment holding company. The business segments of the Company comprise of property investment; communications, media and entertainment (CME); logistics, and property development. The geographical segments of the Company are Hong Kong, China and Singapore. Its Harbour City and Times Square in Hong Kong properties together represent 46% of the company’s total assets. The company's original business focused on the running of wharfage and dockside warehousing. It still holds interests in this business through its ownership of two traditional transportation companies, the Hong Kong Tramway and the Star Ferry; however, these interests make up a relative small part of the company's portfolio.[1]

Business Segments

Property Investment– Revenue of HK$8.7 billion in 2010 (6% increase). Operating Profit of HK$6.5 billion in 2010 (6% increase). This segment is the core profit contributor.

Property Development (China) – Revenue of HK$10.3 billion in 2010 (94% increase). Operating Profit of HK$1.2 billion in 2010 (22% increase)

Logistics – Revenue of HK3.4 billion in 2010 (11% increase). Operating Profit of HK$1.8 billion in 2010 (26% increase)

Communications, Media & Entertainment – Revenue of HK$3.7 billion in 2010 (8% increase). Operating Loss of HK$62 million (138% decrease)

The Wharf (Holdings) Limited operates primarily under four business segments: Property Investment, Property Development, Logistics, and Communications, Media & Entertainment (CME). Property Investment and Property Development together makeup the vast majority of the Wharf's business with strongest growth in Property Development due to the completion and sale of several new properties in China. The rising value of properties in China and Hong Kong have helped to increase profits substantially through investment property revaluations.[1]

Business Growth

The Wharf (Holdings) reported net earnings excluding net investment property revaluation of HK$7.9 billion. Including the net unrealized surplus from the revaluation of investment properties, profits for 2010 amounted to HK$35.8 billion, an 86% increase from HK$19.3 billion in 2009. Valuation of Wharf’s investment property portfolio increased by 26% to HK$148 billion at the end of 2010. Revenue for 2010 amounted to HK$19.4 billion, a 10.4% increase over HK$17.6 billion in 2009 due to stronger recurrent rental income and China property sales.

Trends & Forces

Rising Hong Kong and Mainland China Property Values

Hong Kong housing prices have gained 55% over the 2 year period from May 2009 to 2011 on record-low mortgage rates and buyers from China. In January 2010, Hong Kong was ranked the world’s most expensive place to buy a home by London-based property broker Savills Plc in January. Such growth in the property market has generated substantial profits for Wharf, particularly through the revaluation of the fair value of assets its portfolio.

In November, the Hong Kong government increased property transaction taxes and pledged to boost land supply amid public protests that prices are unaffordable; however, these initiatives have done little to cool the Hong Kong property market.[2]

Growth in Consumption in Hong Kong Market

Private consumption increased in 2010 by 7.6% and is expected to continue to grow due to a two-year low in the jobless rate of 3.4%. Additionally, the Hong Kong government will give a handout of HK$6,000 to each permanent resident in 2011, as stated by Financial Secretary Tsang said in March 2011. The money will encourage retail spending, benefiting businesses in Wharf's Harbour City and Time Square properties.[3]

Competitors

Although the Wharf's business is primarily concentrated on property investment and development, its major competitors include major conglomerates such as Swire Pacific Ltd and Hutchison Whampoa (HKG:13), which operate in Wharf's business segments in addition to several other industries.

Conglomerates

Swire Pacific Ltd - a transnational corporation headquartered in London, England. It controls a range of wholly owned businesses that span areas such as property, aviation, beverages, marine services, and trading and industrial. The group's properties include Island East residential and retail, along with TaiKoo Place, the adjacent Cityplaza retail and office complex and EAST, a lifestyle business hotel, all located in Hong Kong.[4]

Hutchison Whampoa (HKG:13) - an industrial conglomerate with retail, property, energy, infrastructure, and telecommunication operations in 57 countries. Hutchison operates businesses and has investment interests throughout Europe, Asia, and the Americas.[5]

Property

Hopewell HLDGS (HKG:54) - a Hong Kong-based investment holding company. The Company, along with its subsidiaries is engaged in the fields of investment in infrastructure projects, property development and investment, property agency and management, hotel investment and management, restaurant operations and food catering.[6]

Silver Grant Intl (HKG:171) - an investment holding company engaged in seven business segments: distressed assets business, investments, sales of properties, property leasing, property management and production, and trading of petrochemical products.[7]

Communications, Media & Entertainment

PCCW (HKG:8) - a holding company engaged in the provision of local, mobile and international telecommunications services, Internet access services, interactive multimedia and pay-TV services, the sale and rental of telecommunications equipment, and the provision of computer, engineering and other technical services. It also engages in investments in, and development of, systems integration, network engineering, and technology related businesses, and investments in, and development of, infrastructure and properties in Hong Kong, China and elsewhere in the Asia Pacific and Middle East regions.[8]

City Telecom (H.K.) (HKG:1137) - a Hong Kong-based provider of residential and corporate fixed telecommunications network and international telecommunications services. The Company specializes in the residential mass market and small-to-medium corporate and enterprise market segments.[9]

Logistics (Modern Terminals)

Hongkong International Terminals Limited (HIT) - one of several key container port operators in the Port of Hong Kong owned by Hutchison Port Holdings, a subsidiary of Hutchison Whampoa (HKG:13) and the largest port operator in Hong Kong and the world.[10]



References

  1. 1.0 1.1 Wharf Holdings 2010 Annual Report 5/25/11
  2. Bloomberg "Hong Kong Economy Expands Faster-Than-Forecast 7.2%, Adding to Bubble Risk" 5/13/11
  3. Google Finance "Swire Pacific" 5/25/11
  4. Google Finance "Hutchison Whampoa" 5/25/11
  5. Google Finance "Hopewell Holdings" 5/25/11
  6. Google Finance "Silver Grant International" 5/25/11
  7. Google Finance "PCCW" 5/25/11
  8. Google Finance "City Telecom" 5/25/11
  9. Google Finance "Hutchison Whampoa" 5/25/11
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