Li Ka-Shing’s Twin Business Empires Rocked by Pandemic

(Bloomberg) -- CK Hutchison Holdings Ltd. and CK Asset Holdings Ltd., the flagship companies of the business empire founded by Hong Kong’s richest man Li Ka-shing, flagged a significant impact from the coronavirus pandemic.

Retail, telecommunications and ports conglomerate CK Hutchison expects a 50% plunge in retail profit in the first half. Retail will be “acceptable” in the second half, as China and Europe reopen.

A summary of the outlook by the group’s co-managing director Canning Fok was handed out by the company after its annual shareholders meeting Thursday.

CK Asset, the property arm of Li’s empire, said in an exchange filing later on Thursday that it expects the impact of Covid-19 “could collectively result in a material reduction” in net income for the six months ending June 30.

The companies, now led by Li’s elder son Victor Li, are grappling with the impact of the Covid-19 outbreak as economies around the world risk slipping into recession. Volatility in the financial, currency and oil markets pose further challenges to the group, which has operations that extend from Asia to Europe and the Americas.

Their home base of Hong Kong, meanwhile, has weathered a double whammy of pro-democracy protests and the global pandemic. Both have significantly crimped tourism to the Asian financial center, and sent sectors like retail and hospitality into free fall.

Ports, Perfume

CK Asset said it experienced a lower contribution from Hong Kong property sales in the first quarter, a negative contribution from hotel and pub operations, and a significant decline in market value of its holdings in listed real estate investment trusts.

CK Hutchison said its ports business has seen a near 20% profit drop so far this year, with handling throughput falling around 7% to 8%. Its retail units include supermarket chain ParkNShop, electronics stores Fortress, health and beauty care chain Watsons and luxury perfumery ICI Paris.

“Every sector is enduring to survive in the current environment,” the junior Li said at the shareholders meeting. “We are one of the most tenacious of all the companies in the world.”

CK Asset owns good-quality assets and has a debt ratio in the low single digits with ample cash to capture opportunities when they arise, he said.

CK Asset had HK$60 billion of cash as the end of 2019, compared with HK$6.8 billion of debt maturing this year, according to S&P Global Ratings. CK Hutchison reported HK$145 billion of cash and liquid investments as of December. That is 3.6 times its short-term debt, and 1.7 times its debt maturing over 2020 and 2021, according to S&P Global Ratings.

Li Ka-shing and Victor Li have been buying stock in the companies as prices fell. CK Hutchison slumped to its lowest since 2009 on March 19, while CK Asset fell to a record low on the same day. The father and son bought at least 28 million shares in CK Asset and 1.5 million shares in CK Hutchison between March 20 and May 8, according to company press releases.

Shares in CK Hutchison fell as much as 1.5% in early trading Friday, bringing their decline this year to about 25%. CK Asset fell as much as 1.9%, for a year-to-date drop of about 17%.

One bright spot is the group’s telecommunications business, Fok said. Most of CK Hutchison’s networks in Italy, Ireland and Austria are ready to be upgraded to the super-fast 5G networks, he said.

©2020 Bloomberg L.P.