EBITDA之謎思(1)

In the interim report 2005 of Hutchison-Whampoa, there is a 14.9 billion of revenue made by exercising the right to purchase minority shareholder’s interests in Hutchison 3G UK Holdings at a high discount to their net asset value, generating 9.4 billion of revenue after deducting 3 billion of cost. (Point e on page 49 of the report: Profit on elimination of minority interests and disposal of investments – Telecommunications – 3 Group for the six months ended 30 June 2005 includes a profit of HK$9,400 million)

Interim report 2005: http://202.66.146.82/listco/hk/hutchison/interim/2005/intrep.pdf

There is an article describing this transaction:

和黃提前收購英3G業務
　和黃（013）宣布，已行使選擇權，提前向日本NTT DoCoMo及荷蘭KPN收購英國流動電話業務Hutchison 3G UK（H3GUK）20%及15%股權，令H3GUK成為全資附屬公司，交易將為和黃帶來94億元的帳面利潤。有分析員指，交易確能提升和黃今年的盈利，但同樣意味集團需承擔H3GUK的虧損會增加。
　和黃的聲明中表示，完成交易後，將錄得94億元純利，以反映已註銷該公司資產負債表中有關DoCoMo、KPN所持H3GUK少數股東權益結餘。根據集團的年報顯示，至04年底止，H3GUK的少數股東權益結餘約149.9億元，若扣減和黃向兩公司購入H3GUK的總代價30.9億元，集團應可錄得約119億元的盈利，但如今只有94億元入帳，有分析員估計，當中約25億元的差價，相信是攤銷DoCoMo及KPN過去多年於H3GUK的累積虧損，以及匯率上的虧損。
Source: http://www.singpao.com/20050511/finance/711309.html

This transaction is very likely to be a special case of purchasing asset (or is it shareholder’s interest?) at a discount, and the difference between the value of the asset (?) and the cost of buying will be recorded as a profit.
Also, on the income statement on page 32 of the interim report, there is two other revenues called “Change in fair value of investment” and “Change in fair value of investment of jointly controlled entities”, which contribute a total of about 4.5 billion to the EBITDA. This is an extraordinary profit because Whampoa does not have any cash inflow before selling those investments.
Along with the above-mentioned profit about Hutchison 3G UK Holdings (9.4 billion), there is altogether 13.9 extraordinary profit. Although the income statement shows an EBITDA of 10 billion, there will a loss after deducting the above-mentioned extraordinary profit.
Although it is not disobeying any accounting rules, Whampoa did include extraordinary profits which does not have much relation with it’s normal (or core) business. Those extraordinary profits made the EBITDA of Whampoa change from negative to positive. Many investors rely on EBITDA, but I really doubt if it is really so reliable.
Another point to note is that there is a HK$0.51 interim dividend per share. Without the above-mentioned extraordinary profit, issuing dividend with when the company is suffering a loss in income will not be a good signaling.