Li Ka-shing’s Flagship Sees Profit Jump 41% on Easing Virus Pain
CK Hutchison Posts 41% Profit Jump as Virus-Hit Units Recover
(Bloomberg) -- CK Hutchison Holdings Ltd. saw profit surge 41% in the first half of the year, as retail and ports bounced back strongly in its key markets which have started to recover from the pandemic.
The flagship firm of Hong Kong billionaire Li Ka-shing’s conglomerate reported a net income of HK$18.3 billion ($2.4 billion) for the six months through June, according to a statement Thursday. Total revenue rose 12% to HK$212.4 billion for CK Hutchinson, which is part of the Li-founded CK Group. The company raised its interim dividend to HK$0.8 a share, compared with HK$0.614 a year before.
The CK Group, with businesses spanning ports, utilities, telecommunications, retail and real estate, is emerging from an exceptionally challenging year in 2020 which saw headwinds including the pandemic, China’s new national security law in the city and geopolitical tensions with the U.S. On the flip side, being a globally diversified group, it was relatively less exposed to risks like the local virus flare-ups and China’s crackdown on private firms.
“The group should be able to continue on its current growth trajectory and expects to deliver a solid performance for the full year in 2021,” CK Hutchison’s Chairman, Victor Li -- founder Li’s eldest son -- said in the post-earnings statement. But resurgent outbreaks in places that initially managed to curb the spread of Covid-19 remain a risk, he said.
Post-Virus Bump
| Revenue (HK$ billion) | 1H 2021 | 1H 2020 | Growth |
|---|---|---|---|
| Ports and related services | 19.9 | 16 | 24% |
| Retail | 82.6 | 73.6 | 12% |
| Infrastructure | 27.8 | 25.2 | 10% |
| Telecommunications | 50.2 | 47.2 | 6% |
| Finance, investments and others | 31.9 | 27.9 | 14% |
CK Hutchinson makes more than half of its income from Europe and about 19% from geographies outside of Hong Kong and mainland China. As growth in its traditional sectors slows, the empire is pursuing more overseas deals to boost its income but facing headwinds.
The U.K. antitrust authorities are probing a part of its 10 billion-euro ($11.8 billion) sale of European telecommunication towers to Spanish firm Cellnex Telecom SA, adding uncertainty to CK Hutchison’s plan to use proceeds for share buybacks, expansion and debt reduction.
The transaction involves 24,600 tower sites, of which 24% are in the U.K. The two firms have completed transactions of towers in all other locations with CK Hutchison receiving 6.3 billion euros ($7.5 billion) in proceeds.
Mergers and acquisitions in the telecom space as well as investments in utility and other projects that generate a steady income will be among the top priorities in CK Hutchison’s capital allocation, Victor Li said in the post-earnings analyst call.
| Read More |
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| Cellnex, CK Hutchison Towers Deal Faces In-Depth U.K. Probe |
| Old-School Tycoons of Hong Kong Are Losing to China’s Moguls |
| Li Ka-shing’s CK Hutchison Sees First Profit Drop Since 2015 |
Talks with Qatar’s Ooredoo QPSC to combine their Indonesian wireless phone businesses have been underway since December but the deadline for exclusive negotiations, now at Aug. 16, has been extended twice. The companies said they needed more time to finalize the transaction that aims to fend off competition in Southeast Asia’s largest market.
The earnings may enthuse investors after seeing company’s shares lag Hong Kong’s benchmark Hang Seng Index since the coronavirus outbreak in China at the beginning of 2020. Its prices have slumped 24%, compared with a 7% drop of the index.
CK Hutchison’s sister firm, CK Asset Holdings Ltd. posted a 31% rise in net income to HK$8.4 billion. It raised dividend to HK$0.41 per share from HK$0.34 last year, the firm said in a statement.
The property developer has seen further diversification this year through recent acquisitions in European infrastructure and utility assets from Li’s personal funds. They are meant to generate more recurrent income for the company. It’ll also get a part of the proceeds from ESR Cayman Ltd.’s Wednesday announcement to acquire ARA Asset Management Ltd. for $5.2 billion. CK Asset owns 8.3% of ARA, according to an exchange filing.
Home Buyers’ Appetite
CK Asset has also benefited from an active residential property market in Hong Kong. Low borrowing costs and continued lack of supply have increased buyers’ appetite in homes.
The firm managed to sell 13 units of its ultra-luxury 21 Borrett Road project in Hong Kong’s Mid-Levels for HK$3.2 billion in the first half -- a sign that the high-end market is improving even though travel restrictions with mainland China remain in place.
The trend of emigration from Hong Kong is another tailwind for the developer, which has a pipeline of residential developments in the U.K. Being a familiar name to Hong Kong immigrants, CK Asset could attract demand from these potential buyers, according to a note dated July 8 by Bloomberg Intelligence analyst Patrick Wong.
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