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CK Hutchison Holdings Ltd 00001

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CK Hutchison's Italian Telco Operations Still Weighed by Competition; Our FVE Unchanged

Lorraine Tan, CFA Regional Director

Analyst Note

| Lorraine Tan, CFA |

CK Hutchison's, or CKH's, European and Hong Kong telco operations division is showing a collectively sluggish top line down 2% for the nine months year-to-end September over the year-ago period. Its quarterly management update by the telco group indicates that this is mainly driven by ongoing competition in Italy. We expect that this will be offset by a currency tailwind on the CKH level and leave our core assumptions unchanged for 2021. We do, however, tweak our 2022 top-line forecast lower for 3 Italia's challenges to linger and some currency headwind. Also, management guides that the sale of the British tower assets will probably be completed in early 2022. This leads us to shift one-off gains, which we estimate at HKD 14.5 billion associated with this sale to 2022 but we note that gains related to its merger of its Indonesian business with Ooredoo could add to 2021 profit. We estimate net profit to be HKD 43.9 billion and HKD 51.6 billion in 2021 and 2022, respectively, inclusive of one-off gains. All in, there is limited impact to our fair value estimate, which remains at HKD 80 for CKH. Share buybacks have so far totaled 0.5% of the capital base in 2021, which doesn't move the needle much so shares outperformance is still in need of a catalyst.

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Company Profile

Business Description

CK Hutchison Holdings is a Hong Kong headquartered conglomerate with key businesses in ports, retail, infrastructure, and telecommunications. The company was created in 2015 to house the merged assets of Cheung Kong Holdings and Hutchison Whampoa as the group sought to flatten out and simplify its original holding structure. CK Hutchison contains most of the businesses previously housed in Hutchison Whampoa, minus the property assets, which have been spun off into their own listing, CK Asset Holdings. Telecommunications activities now make up the largest share of EBITDA at around 32%.

2 Queen’s Road Central, 48th Floor, Cheung Kong Center
Hong Kong, Hong Kong
T +852 21281188
Sector Industrials
Industry Conglomerates
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 172,907