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On Wednesday, HSBC analysts led by Raymond (NSE:RYMD) Liu resumed coverage on CK Hutchison Holdings Limited (1:HK) (OTC: CKHUY), issuing a Buy rating but lowering the price target to HK$53.00 from the previous HK$72.00. The analysts highlighted the company’s position as a deep value stock with a broad range of globally diversified quality assets. InvestingPro data supports this value proposition, showing the stock trading at just 0.31 times book value with a P/E ratio of 10, while maintaining an impressive 60.8% gross profit margin.
The report noted that CK Hutchison’s market capitalization is roughly equivalent to the combined market value of just two of its five business segments, specifically CK Infrastructure Holdings Limited (CKI) and Cenovus Energy Inc (NYSE:CVE). This valuation leaves little implied worth for its other three significant business areas—global retail, telecommunications, and port operations—which together represent 69% of HSBC’s appraised valuation of the company. The company’s strong financial position is evident in its 5.5% dividend yield and 34-year track record of consistent dividend payments, according to InvestingPro analysis.
HSBC analysts believe that CK Hutchison’s valuation will find support through asset recycling strategies. This assessment follows the company’s recent move to propose the divestment of its global port business, which accounts for 20% of HSBC’s appraised valuation. The anticipated proceeds from this proposed sale are expected to exceed CK Hutchison’s current market capitalization.
Furthermore, HSBC anticipates an improving business outlook for CK Hutchison. Signs of business improvement were observed since the second half of 2024, and the analysts forecast that the company’s recurring profit will rise modestly by 5% year-over-year in 2025, in contrast to declines of 9% and 11% in 2023 and 2024, respectively. This positive projection is based on the expectation of continued recovery in the company’s operations.
In other recent news, CK Hutchison Holdings Limited has agreed to sell a significant portion of its ports business to a consortium including BlackRock Inc (NYSE:BLK). for $22.8 billion. This transaction, which excludes interests in ports in China and Hong Kong, is expected to enhance CK Hutchison’s financial profile, with cash proceeds potentially exceeding $19 billion. The company is also under investigation by Panamanian authorities regarding a $1.2 billion payment dispute, which CK Hutchison has denied, emphasizing its substantial investments in Panama. In light of these developments, Fitch Ratings has placed CK Hutchison’s ’A-’ rating on Rating Watch Positive, citing an anticipated improvement in the company’s credit profile post-transaction. UBS has upgraded CK Hutchison’s stock from Neutral to Buy, raising the price target to HK$59.50, following the announcement of the ports business sale. The analyst from UBS highlights a potential positive revaluation of the company’s assets as a key factor for the upgrade. Meanwhile, CK Hutchison has reiterated its commitment to Panama, noting its unique position as the only port company with state ownership. These recent developments underscore CK Hutchison’s strategic moves to strengthen its financial standing and investor confidence.
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