CK Hutchison Holdings Ltd (CKH) is a HKEX-listed multinational conglomerate. It has a wide business interest spanning across 50 countries worldwide. Presently, CKH is worth HK$ 316.3 billion in market capitalisation and is among one of the 50 constituents of the Hang Seng Index.

In this article, I’ll bring an update on its recent financial results and its valuation figures. Thus, here are 13 things to know about CKH before you invest.

  • Reorganisation
    As of 3 June 2015, the Cheung Kong Group (CK) had completed a major reorganisation exercise where its former entities which include Cheung Kong (Holdings) Ltd and Hutchison Whampoa Ltd merged their assets & simultaneously reallocated them into CKH and CK Assets Holdings Ltd.

    CKH is a conglomerate with its various business interests stated in Point 2. Meanwhile, CK Assets Holdings Ltd is a property-based company and is also one of the 50 constituents of the Hang Seng Index.


  • Core Businesses
    CKH has 5 core businesses and their revenue breakdown are as follows:

No.

Core Businesses
Revenue 2018
(HK$ Million)
Revenue 2018(%)
1Ports and Related Services35,1757.8%
2Retail168,99137.3%
3Infrastructure64,72414.3%
4Husky Energy54,25112.0%
5Telecommunications94,54320.9%
6Finance & Investments and Others35,5467.8%
7CKH’s Total Revenues453,230100.0%

Source: CKH’s Annual Report 2018

  • Core Business 1: Ports & Related Services
    CKH is the world’s leading port operator. It has interests in 51 ports that are equipped with 288 berths in 26 nations worldwide. It reported 84.6 million TEUs in its overall throughput in 2018. It is relatively stable if we compare it with throughput for the last 5 years. Overall, it had achieved higher sales from HK$ 32.2 billion in 2016 to HK$ 35.2 billion in 2018.

Source: CKH’s Annual Report 2018

  • Core Business 2: Retail (Mainly Watsons)
    CKH operates this segment under A S Watson (ASW), which has a total of 12 retail brands with 14,976 stores in 24 markets worldwide. Nearly 50% of its store counts arise from Watsons stores in 13 countries over Asia and Europe. Overall, the segment’s revenues have increased from HK$ 151.5 billion in 2016 to HK$ 169.0 billion in 2018. It is attributable directly to continuous growth in store count from 13,331 in 2016.

Source: CKH’s Annual Report 201

  • Core Business 3: Infrastructure
    CKH has 75.7% interest in CK Infrastructure Holdings Ltd (CKI), which is also a HKEX-listed company. It invests in energy, transportation, waste, water, and household-based infrastructure assets in China, Hong Kong, Australia, New Zealand, the United Kingdom, Europe, and Canada.

    CKH also co-owns 6 infrastructure assets namely Northumbrian Water, Park’N Fly, Australian Gas Networks, Dutch Enviro Energy, UK Rails and Wales & West Utilities. In October 2018, CKH had disposed of 90% of the aggregate benefits of all of its 6 infrastructure assets to related entities such as CKI, CK Assets Holdings Ltd, and Power Assets for a total of HK$ 21.6 billion. Therefore, its remaining interests in the 6 assets would be transferred to CKH’s finance & investment and other division in 2019.

Source: CKH’s Annual Report 2018

  • Core Business 4: Husky Energy
    CKH has 40.19% stake in Husky Energy, Inc, an integrated energy entity listed on the Toronto Stock Exchange (TSE). As of 31 December 2018, it has 2.54 billion barrels of oil equivalent of proven and probable oil and gas reserves. In line with improved oil prices, its revenue had increased from HK$ 30.5 billion in 2016 to HK$ 54.3 billion in 2018.

Source: CKH’s Annual Report 2018

  • Core Business 5: Telecommunications
    CKH’s telecommunication segment consists of assets such as:

    – 3 Group Businesses in Europe
    – 66.09% stake in Hutchison Telecommunications Hong Kong Holdings.
    – Hutchison Asia Telecommunications


    Revenue had grown from HK$ 82.7 billion in 2016 to HK$ 94.5 billion in 2018. This is largely attributed to growth from its 3 Group Businesses in Europe during the period.

Source: CKH’s Annual Report 2018

  • Group Profitability
    Over the past 3 years, CKH has achieved consistent growth in both total revenue and shareholders’ earnings. Total revenue has grown from HK$ 383.3 billion in 2016 to HK$ 453.2 billion in 2018. This had led to higher shareholders’ earnings from HK$ 33.0 billion in 2016 to HK$ 39.0 billion in 2018. Its earnings per share (EPS) grown from HK$ 8.55 in 2016 to as much as HK$ 10.11 in 2018.

    CKH has 3-year Return on Equity (ROE) of 8.23% per year. It means, the company has made, on average, HK$ 8.23 in annual earnings from each HK$ 100 in shareholders’ equity from 2016 to 2018.

Source: CKH’s Annual Report 2018

  • Cash Flows Management
    From 2016 to 2018, CKH has brought in HK$ 149.67 billion in cash flows from operations and has raised HK$ 44.11 billion in net long-term debt.
    Out of which, it has spent:

    – HK$ 71.11 billion in capital expenditures (CAPEX).
    – HK$ 12.76 billion in acquisition of telecommunication services.
    – HK$ 31.83 billion in dividends to its existing shareholders.

    Evidently, CKH is a cash-cow and is able to raise positive cash flows on a continuous basis from its operations. Thus, it is able to sustain dividend payouts to its existing shareholders.

Source: CKH’s Annual Report 2018

  • Balance Sheet Strength
    As of 31 December 2018, CKH has non-current liabilities of HK$ 419.49 billion and total equity of HK$ 590.82 billion. Hence, its gearing ratio is 71.0%. Also, CKH has current assets of HK$ 343.19 billion and current liabilities of HK$ 221.93 billion. Thus, its current ratio is 1.55.


  • P/E Ratio
    As of 28 April 2019, CKH is trading at HK$ 82.00 a share. In 2018, it has reported EPS of HK$ 10.11. Hence, its current P/E Ratio is 8.11.

Year20162017201828/4/2019
P/E Ratio10.2810.787.448.11
  • P/B Ratio
    As of 31 December 2018, CKH has net assets of HK$ 115.67 a share. As such, its current P/B Ratio is 0.71.

Year20162017201828/4/2019
P/B Ratio0.800.880.650.71
  • Dividend Yields
    CKH has increased its dividends per share (DPS) from HK$ 2.68 in 2016 to HK$ 3.17 in 2018. If it is able to maintain its DPS at HK$ 3.17 for the subsequent years to come, its current dividend yield is 3.87% per year.

Year20162017201828/4/2019
Dividend Yield
3.05%

3.01%

4.22%

3.87%

VIA’s Verdict

Since its reorganisation, CKH has delivered a much improved financial result in the last 3 years. However, its stock price had remained relatively depressed as it dropped from HK$ 114.30 in June 2015 (after its reorganisation) to HK$ 82.00 a share presently.

Source: Google Finance


As a result, CKH’s valuation figures are on the low side when compared to CKH’s valuation figures in 2016 and 2017.

Hence, here is a question: ‘Would you invest in CKH at HK$ 82.00 a share?’

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