HONG KONG (Dow Jones) - Bermuda-registered Jardine Matheson Holdings Ltd. (H.JDM), the Singapore- and London-listed holding company for Hong Kong's oldest trading house, is set to see a ten percent rise in 2002 earnings, as an improvement in hotel and retail operations offset weak office rents.

The Asia-based conglomerate's 41 percent-owned Hongkong Land Holdings Ltd. (H.HKL), which is controlled by Jardine Strategic Holdings Ltd. (H.JDS), will be the main drag on earnings, analysts said.

"Jardine Matheson should see a contribution improvement from Mandarin Oriental, retailer Dairy Farm and Singapore's Cycle & Carriage," said Winnie Chiu, an analyst at DBS Vickers, who rates the retail-to-property conglomerate as a hold.

A poll of four analysts by Dow Jones Newswires has a consensus forecast for Jardine's underlying profit of US$205 million, up from US$186 million in 2001. The underlying figure includes exceptional items, but not the value of Hongkong Land's leasehold properties. That figure is roughly equivalent to the net profit Jardine would report under Hong Kong accounting standards.

Last year, the Jardine companies began filing accounts based on International Accounting Standards (IAS). IAS requires companies to undertake the revaluation of investment properties through the profit-and-loss account rather than through reserves, as done traditionally by Hong Kong companies.

Meanwhile, net profit should climb into the black, after a loss of US$42 million in 2001, analysts said. The inclusion of revalued properties means that different analysts take a different base for comparison and a consensus net profit wasn't immediately available for Jardine Matheson. Among the Jardine units that likely did well are Bermuda-registered hotel group Mandarin Oriental International Ltd. (H.MOI), which according to a poll of four analysts by Dow Jones Newswires, should see net profit rise to US$21 million, from the post-September 11 level of US$6.7 million in 2001.

"We believe the major hotels of Mandarin have achieved better than expected occupancy in the second half of 2002," said Deutsche Bank analyst Orlena Wong, who upgraded the hotel stock to a hold from a sell on Wednesday.

Bermuda-registered Dairy Farm International Holdings Ltd. (H. DFI), which sold its Woolworths New Zealand unit in the first half, has been steadily recovering after it sold its struggling Australian grocery chain Franklins in 2001.

In the first half, Dairy Farm's net contribution to Jardine Matheson's earnings climbed more than threefold to US$14 million, while Singapore-based motor vehicle unit Cycle & Carriage Ltd.'s (P. CYC) net contribution rose to US$16 million from US$1 million.

Jardine Matheson indirectly owns 69 percent of Dairy Farm, 50 percent of Cycle & Carriage, and 72 percent of Mandarin Oriental through a complex series of cross-holdings. It also owns 79 percent of holding unit Jardine Strategic, which directly controls Dairy Farm, Mandarin Oriental and Cycle & Carriage, and also owns 51 percent of parent Jardine Matheson.

Hongkong Land To Weigh On Earnings

Jardine Strategic's other significant holding - Hongkong Land - didn't fare as well, analysts said.

The consensus forecast for Hongkong Land's underlying profit is about US$180 million, according to six analysts polled by Dow Jones Newswires, down from US$213 million in 2001, as weak rental markets took their toll. Office rents in Hong Kong's Central district, where most of Hongkong Land's properties are located, fell 29 percent last year, according to DBS Vickers Securities, compared with a 22 percent decline in other key districts.

For the first half of 2002, Hongkong Land posted an underlying profit of US$96 million, down from US$114 million previously. But, including the revaluation of properties, it swung to a net loss of US$506 million, compared with a net profit of US$114.4 million the previous year.

Analysts said they expected Hongkong Land to cut its full-year dividend to about 7 US cents, from 9 US cents in 2001.

"The combination of two share buybacks and new (property) developments have reduced cash from a peak in 2000 of US$1.3 billion to just US$380 million and raised gearing to 26 percent from 7.5 percent," said CLSA analyst John Saunders, who rates the stock as a sell.

Dairy Farm, Hongkong Land and Mandarin will post full-year results today, while Jardine Matheson and Jardine Strategic report tomorrow.

One of Hong Kong's oldest "hongs," or diversified trading groups, Jardine Matheson delisted its shares - as well as those of units - from Hong Kong in 1994, ahead of the city's handover to China.

It moved its primary listing to London and its secondary listing to Singapore.

Apart from the Jardine Strategic units, the key businesses in Jardine Matheson's stable are wholly owned Jardine Pacific, which controls cargo operator HACTL and retailer IKEA in Asia, fully owned Jardine Motors and 32 percent owned insurer Jardine Lloyd Thompson Group PLC (U. LTG).

The Jardine group is still largely controlled by Britain's Keswick family, descendants of cofounder William Jardine.