Date
24 July 2017
Lee Shau-kee (center), chairman of Henderson Land, could cap his career with a value-unlocking restructuring of his company, emulating fellow tycoon Li Ka-shing. Photo: HKEJ
Lee Shau-kee (center), chairman of Henderson Land, could cap his career with a value-unlocking restructuring of his company, emulating fellow tycoon Li Ka-shing. Photo: HKEJ

CK Hutchison, Henderson Land attractive now

In a highly volatile market, the big-cap Hong Kong stocks, like CK Hutchison Holdings Ltd. (00001.HK) and Henderson Land Development Co. Ltd. (00012.HK), are easy and reasonable choices.

Their stable performance during the turmoil has reflected their value.

It is not for nothing that investors love the two stocks.

Have a look at CK Hutchison.

The company is the result of a major restructuring of tycoon Li Ka-shing’s flagship, Cheung Kong (Holdings), and his conglomerate, Hutchison Whampoa, which has been seen as an attempt to bring to the fore the two firms’ non-property businesses — their property assets were spun off into Cheung Kong Property Holdings Ltd.

In the first half, analysts noted that CK Hutchison’s telecoms business in Europe will be the engine for growth in the firm’s profit.

Recently, co-managing director Canning Fok Kin-ning told the media the telecoms business has entered the “fat cow years”.

Morgan Stanley earlier reiterated its overweight rating for CK Hutchison, expecting the integration of its telecoms businesses in Ireland and Austria to create synergy.

It also said that, as a next step, the integration of its Italian telecoms business is likely to be successful and increase CK Hutchison’s asset value by 3 percent.

The firm is also expected to benefit from the restructuring of its subsidiary Cheung Kong Infrastructure Holdings Ltd. (CKI, 01038.HK).

Pegasus Fund Managers research said CK Hutchison can dispose of 27 percent of the stake it holds in CKI at a good price, paring its stake to below 50 percent — which will allow CKI’s debt to be excluded from CK Hutchison’s balance sheet.

In addition, CKI may have the chance to participate in the restructuring of CK Hutchison’s port business.

Li mentioned in March 2014 that the Watsons pharmacy chain might be spun off within two years.

As that deadline approaches, we can expect more moves by CK Hutchison.

Meanwhile, if we listen to the words of “Uncle Four” (Lee Shau-kee) carefully, we may conclude that he wants to have a perfect ending to his career.

Citi suggested that Henderson Land may be the next major Hong Kong firm to undergo a reorganization.

Analyst and columnist Yiu Wing-him has calculated that the potential rise in the price of Henderson Land shares will be even bigger than that of CK Hutchison after their respective restructurings.

Uncle Four has continued to increase his holdings in Henderson Land.

We should follow in his footsteps.

This article appeared in the Hong Kong Economic Journal on Oct. 5.

Translation by Myssie You

[Chinese version中文版]

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MY/JP/FL

Columnist of the Hong Kong Economic Journal

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