CK Asset (1113.HK) – Property conglomerate no more? Re-defining itself amidst underreported international diversification
A well-timed overseas shopping spree has shored up the balance sheet and positions the Company to seize recovery opportunities back home
CK Asset Holdings (1113.HK; “CK Asset”), with a market cap of USD 14.37 billion, originally part of the Cheung Kong Group, was established as a standalone entity in 2015 and rebranded from Cheung Kong Property Holdings Limited in 2017. Hong Kong’s richest man, Li Ka-shing built his wealth by founding and building this company into a diversified global empire spanning property, hospitality, and infrastructure.
Management was taken over by Ka-shing’s son Victor in 2018 and has shown signs of creating shareholder value since then, particularly by buying up depressed assets overseas and turning them around – in his own words:
“We are in an advantageous position now with choices. Currently, we have a number of investments overseas, generating double-digit returns. And when opportunities present themselves in Hong Kong and should the need arise, we can generate substantial liquidity from these assets to take on very large projects in Hong Kong or the Mainland.”
Victor Li, H124A interim call
Yet as with all Hong Kong conglomerates, sentiment is poor and there is an inherent discount to this stock. Even without applying any discount, the share price reflects fair value for overseas non-property holdings and REITs, investors seem to have written off the potential for a longer term rebound in the HK / China property market.
Case in point – even looking at CK Hutchison (0001.HK), the market isn’t rewarding high quality businesses with no local property exposure. CK Hutchison owns an array of high quality (albeit low returns in the current environment) overseas infrastructure assets and benefits from recent catalysts such as the merger between its two subsidiaries Vodafone UK and Three UK .
CK Asset benefits from a well-timed overseas shopping spree, which saw it picking up high quality infrastructure, utilities and hospitality assets just before COVID-19 and the China property downturn. We feel CK Asset has been dragged down by the resulting negative sentiment around Hong Kong property conglomerates, as most of its revenues come from overseas non-property businesses. On the property front, we feel CK Asset has been unfairly penalized over the China real estate downturn, as the business historically took a conservative approach to Mainland real estate and this part of the business remains profitable.
