Moody’s Investors Service has put the A3 issuer rating of Hutchison Whampoa on review for possible downgrade. At the same time, Moody’s has also put on review for possible downgrade the A3 ratings on all guaranteed debt issued by HWL’s financing subsidiaries. The rating action was in response to HWL’s interim results and the announcement by its 84.58%-owned listed subsidiary, Cheung Kong Infrastructure Holdings Ltd (CKI, 01038), that a consortium, in which it has a 40% interest, is offering to acquire the UK electricity distribution network from EDF Energy Plc (A3, RFPD) for a total offer price of GDP5.8 billion. “The review was prompted by HWL’s slower-than-expected trend in deleveraging, such that Its key credit metrics remain weak for its rating, and despite improvements in the performance of the 3G business and most of its other key businesses,” said Elizabeth Allen, a Moody’s Senior Credit Officer. Moody’s has previously expressed concern over HWL’s modest credit metrics, as well as the uncertainty over the timing and magnitude of its deleveraging. Although consolidated EBITDA (including the share of associate’s) improved by 13% year-on-year, net debt (excluding equity from cash) also increased moderately, mainly due to its payment for the privatization of HTIL of HK$4.2 billion. The credit rating said the acquisition will turn CKI from a net cash to a net debt position, although Moody’s acknowledges the quality of the underlying assets and the consideration that the amount required by CKI is affordable.

For Hutchison Whampoa’s (0013.HK) long-suffering investors, a turnaround in fortunes may finally be at hand, as heavy losses at conglomerate’s 3G business finally coming to end, with company tipping 3G operations in most markets to report profit in 2011. Moving spotlight off of 3G blunders could mean investors will take notice of faster-growing ports, retail businesses–both beneficiaries of global economic recovery. The stock rose 13% in 2 trading days on Friday and Monday.

On the other hand, Goldman Sachs boldly predicts Hutchison Whampoa may trade up to over HK$100 per share, although this isn’t it is far away from its official price target at HK$66. The House says after cost cutting initiatives in the past 1-2 years, leaner cost structure should help to drive conglomerate’s profitability especially in port, retail divisions in 2H10. While there is less visibility for non-3G recovery given uncertainties on global economies, they are financially equipped to weather potential downturn. Despite share price rally last week, “we believe the market has not fully appreciated the upside potential from 3G turnaround,” GS says. Adds, if, when market willing to value stock with zero or positive NAV for H3G, house’s non-3G value for Hutchison is HK$101-HK$103.