Hutchison cashes in after switching

HONG KONG investors did not have long to wait before Hutchison Whampoa moved to capitalise on this week's asset swapping.

The telecoms-to-ports conglomerate owned by billionaire Li Kashing, today rose 25 cents to HK$64.50 in a weaker wider market after placing out a chunk of shares in listed affiliate Vanda Systems and Communications.

The sale netted Li a profit of HK$1.6bn (£113m), a relatively modest sum by Hutchison's dollar-rich standards. It will, however, come in handy as the group moves to generate a series of one-off gains to plug the red ink from its third-generation (3G) mobile phone gamble.

Earlier this week Hutchison injected its unlisted fixed-line unit Hutchison Global Communications into Vanda, a systems integrator in which it had a substantial stake. In exchange Hutchison took new Vanda shares, giving it more than 80% of the company.

Vanda's stock shot higher as investors raced to grab Li's coat-tails. Hutchison then placed out two billion Vanda shares, enabling it to generate hard cash in place of some of its paper.

To get the deal away Hutchison had to sell down its controlling stake in Vanda at a steep discount. It offloaded the Vanda shares at 90 cents apiece, a full 41% down on the company'sclosing price yesterday. After the rapid sale, Hutch's stake in Vanda was pared to a shade under 50%. Vanda shares remained suspended today.

The deft manoeuvre was a classic piece of financial wizardry from the man Hong Kong's Press calls Superman.

Beforehand, Hutchison and Li had a major stake in Vanda and full, separate ownership of Hutchison Global Communications.

Afterwards, Hutchison had retained effective control of Vanda and by extension, kept control of Hutchison Global. It also had the HK$1.6bn in the kitty.

Analysts say there will be more asset switches and several listings to keep the cash rolling in. Although the group has said that its financial position remains strong, the tide of cash from exceptionals will be needed to plug the 3G leakage.

In a recent note to clients JP Morgan analysts Steven Li and Hetal Shah flagged up an IPO for Hutchison's Indian cellular business, which could provide gains of HK$4bn; the launch of a listed property investment trust (HK$7bn); and a sale of Canadian oil unit Husky Energy (up to HK$9bn).

By JP Morgan's estimates Hutchison needs to generate about HK$6bn in exceptional gains this year and a further HK$7bn in 2005 to help it absorb the expected losses from 3G.

The rest of the market was softer as it continued to pull back from a 19-month high hit on Tuesday on selective profit-taking.

Bank of East Asia fell 15 cents to HK$24.10 and Bank of China (Hong Kong) dipped five cents to HK$14.55. The Hang Seng index traded at 13,295.81, down 38.02 points.

Tokyo stocks were little changed after three losing sessions. Sony gained 30 yen to 4,290 after the electronics and entertainment group detailed one-off charges tied to its three-year restructuring bid.

The Nikkei 225 Stock Average firmed 4.17 points or 0.04% to 10,783.61.

Thailand, which has been undermined by the outbreak of bird flu, went into the weekend nursing further declines. The SET index backtracked 2.09 points to 711.95.