Merrill Lynch & CLSA Trim Hutchison Whampoa’s (ADR: HUWHY) Target Price

Bank of America-Merrill Lynch trimmed Hutchison Whampoa ‘s (ADR: HUWHY HongKong stock code 0013) target to HK$63 (ADR U$40.44) from HK$66 (ADR $42.37) on weaker euro but kept Buy rating. The bank said investors were too pessimistic on Hutchison’s Europe exposure. Valuation attractive, at 40% discount to revised FY10 estimated NAV of HK$79 (US$50.71) per share vs previously HK$85 (US$54.56). The bank said even if euro reached parity with USD, would only reduce estimated NAV by another 1.5%. If global economy headed into double dip, Hutch would undoubtedly be hurt, but expectations already very low with shares trading at 0.7X P/B vs 5-year historical average of 1X.

CLSA also cut Hutchison Whampoa’s target to HK$60 (ADR: $38.51) from HK$68 on widened 35% discount to NAV vs 30% previously. The House said any appreciation in CNY would be positive to the firm’s landbank, investment properties, ports and consumer businesses in China. However, prevailing weakness in euro was negative for Hutchison given its exposure to retail assets in Europe, 3G in Italy and ports in Netherlands. The House said a 5% depreciation in euro would hit Hutchison’s NAV by about 0.8%. It kept Hutichison’s rating as Outperform and it said tempted to upgrade the stock to Buy rating on attractive valuation of 42% discount to NAV, 0.7X P/B, but it refrained from doing so due to lack of clear catalysts.It advised deep-value investors with long investment horizons to accumulate the stock.

According to the data of Hong Kong Stock Exchange, Li Ka Shing, the chairman of Hutchison Whampoa, has acquired 100,000 and 50,000 shares in the company, at HK$49.80 and HK$49.95 apiece, on 24 and 25 June 2010; and 50,000 and 100,000 shares at HK$47.99 and HK$48 apiece, respectively, on 2 and 5 July 2010. Li’s shareholding in the company has then soared to 51.92% The stock closed at HK$48.85 (ADR $31.36) on Friday.

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