PREVIEW-Hutchison, Cheung Kong H1 net seen sharply lower

* What: Hutchison Whampoa and Cheung Kong H1 results

* When: Thursday, Aug 21

* H1 net seen falling on lower gains from disposals

* 3G arm may move into EBIT positive in late 2008

By Alison Leung

HONG KONG, Aug 19 (Reuters) - Hutchison Whampoa (0013.HK), controlled by billionaire Li Ka-shing, is likely to post a 71 percent fall in first-half net profit on lower income from asset sales, but its underlying profit should rise, thanks to a strong performance at Husky Energy (HSE.TO) and improved 3G business.

Earnings at sister firm Cheung Kong (Holdings) (0001.HK), the city's second-largest developer by market value, should fall by a similar degree as it owns nearly half of the ports-to-telecoms conglomerate, according to analyst forecasts.

Cheung Kong and Hutchison, the twin flagships of the bespectacled, 80-year-old Li's multi-billion dollar empire, are set to announce mid-year results on Thursday.

Hutchison's third-generation (3G) telecoms network is expected to trim operating losses by half to HK$5.7 billion as subscriber churn slows and handsets get cheaper

The business in which Hutchison has pumped about $25 billion, may finally stop bleeding and report its first monthly operating profit in late 2008 after eight years of losses.

"This would be viewed positively by the market," said Jonas Kan, an analyst at the Daiwa Institute of Research.

Hutchison group's free cashflow should improve and will allow Hutchison to accelerate the pace of acquisitions, such as in ports, taking advantage of falling asset prices globally, analysts said.

"The company had previously announced the setting up of a global water treatment operation, and we believe there could be acquisitions on this front as well," Credit Suisse analyst Cusson Leung said in a report.

Hutchison, which operates in 57 countries with holdings ranging from drug stores and supermarkets to property and telecommunications, launched a new division in March to tap rising demand globally for water treatment.

Falling asset prices could however further forestall its long-discussed spinoff of Italian telecoms unit 3 Italia.

Lingering concerns over a global economic slowdown and a weaker Hong Kong property market after a booming 2007 are expected to put pressure on shares in Hutchison and Cheung Kong.

"There is a possibility that Cheung Kong will fall below HK$100 after the results, but Hutchison could see support on the downside," said Alex Tang, a research director at brokerage Core Pacific-Yamaichi International.

By 0430 GMT on Tuesday, Cheung Kong shares traded at HK$103.0 and Hutchison at HK$72.1.

Hutchison shares fell 11 percent in the first half, outperforming a 20.5 percent loss in the Hang Seng Index .HSI, but Cheung Kong shares dropped 27 percent in the same period.

UNDERYLING PROFIT

Hutchison's net profit should fall to HK$8.47 billion ($1.08 billion) in the first six months of 2008, based on an average forecast of four analysts polled by Reuters.

That compares with a net profit of HK$28.8 billion in the same period last year when it booked a HK$35 billion gain from the sale of its Indian mobile phone network to Vodafone (VOD.L).

Lower contributions from Hutchison and limited property development profits booked during the period should send Cheung Kong's net profit down about 67 percent to HK$6.1 billion, according to forecasts of four analysts polled by Reuters.

But more property completions expected in the second half should help Cheung Kong generate full-year profit of HK$13.2 billion, an average forecast from 11 analysts polled by Reuters Estimates showed.

So far, Hutchison's operations worldwide have seen little impact from the global economic downturn, with its established businesses from ports to retail expected to have seen earnings growth of 57 percent in the first half from a year ago.

Record oil prices should help Canadian affiliate Husky Energy's contribution to Hutchison's bottom line jump by 85 percent in the first six months of 2008. Its sale of 50 percent of the Sunrise oil sands to a joint venture with BP Plc (BP.L) should generate a further HK$2 billion of profit.

Contributions from Hutchison's world-leading container ports unit could rise between 7 percent and 10 percent as the group continues to diversify its earnings base.

Although retail sales in Europe are stagnating, Hutchison's sprawling retail operations are likely to have seen a 49 percent jump in profit as margins expanded after management enforced cost cuts.

Operating profits from its property business should rise 135 percent, boosted by rent increases, China property sales and a HK$2 billion gain from the sale of an office building in Shanghai by unit Hutchison Harbour Ring (0715.HK). (Additional reporting by Joy Leung; Editing by Ken Wills and Anshuman Daga) ($1=0.6811 Euro=HK$7.813) ($1=7.811 Hong Kong Dollar)