Global Senior Analyst, Fundamental Equity Research

Emile Farsoun

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/ck-hutchison-holdings-ltd" target="_blank" data-smartkarma-citation="entities:132:1" rel="noopener">CK Hutchison Holdings (1 HK)</a> has underperformed the HSI index by roughly 10% year-to-date. This is mainly due to the cloudy outlook, stemming from weakening economies in Hong Kong, US-China trade war impact, and a hard Brexit.
CH Hutchinson is a Hong Kong based conglomerate, the flagship holding company of Li Ka-Shing, whose family owns 30.15%. The Company operates its business through five segments: the Retail segment, the Telecommunications segment, the Infrastructure segment, the Ports and Related Services segment, and the Husky Energy segment.
Currently, the stock is trading at a 40% discount to NAV, which discounts a worst case scenario, and sets up the stock for outperformance for long term investors, as most of the concerns turn out less than feared. The stock has a 4.35% dividend yield, providing decent income for patient investors. The implied valuation is attractive with an 8.5% FCF yield, forward P/E of 6.7x, and forward EV/EBITDA of 9.9x.
The current valuation offers an attractive entry point for the stock, given the mid single digit earnings growth, driven by stabilization for the Italian Telecom operation, along with the robust growth for the Retail and Energy businesses.

CK Hutchison Holdings (1 HK) has underperformed the HSI index by roughly 10% year-to-date. This is mainly due to the cloudy outlook, stemming from weakening economies in Hong Kong, US-China trade war impact, and a hard Brexit.
CH Hutchinson is a Hong Kong based conglomerate, the flagship holding company of Li Ka-Shing, whose family owns 30.15%. The Company operates its business through five segments: the Retail segment, the Telecommunications segment, the Infrastructure segment, the Ports and Related Services segment, and the Husky Energy segment.
Currently, the stock is trading at a 40% discount to NAV, which discounts a worst case scenario, and sets up the stock for outperformance for long term investors, as most of the concerns turn out less than feared. The stock has a 4.35% dividend yield, providing decent income for patient investors. The implied valuation is attractive with an 8.5% FCF yield, forward P/E of 6.7x, and forward EV/EBITDA of 9.9x.
The current valuation offers an attractive entry point for the stock, given the mid single digit earnings growth, driven by stabilization for the Italian Telecom operation, along with the robust growth for the Retail and Energy businesses.

CK Hutchison (1HK): Cloudy Outlook, yet Valuation Underpinned by Strong Free Cash Flow