CK Hutchison Holdings (0001.HK)

[money]

CK Hutchison is a well-run conglomerate that holds subsidiaries with moats around their business. I will keep it on my watch list and might buy the share when it's so obviously cheap  in terms of dividend yield, PEG, EV/EBITDA, etc that you don't need a precise SOTP calculation for a confident decision.

The recent market turmoil did not leave CK Hutchison unaffected and I decided to buy tuesday at 49.50 HKD per share. As stated earlier, I will not pretend that I am able to value this complicated conglomerate in all details, but as Ben Graham said: “You don’t have to know a man’s exact weight to know that he’s fat.”

The stock is quoted with a P/E around 5. This seems ridiculously low to me. Note that the E here, is not inflated by any non-recurring income. CK Hutchison had a presentation of it's FY 2019 results last week and those results were overall pretty similar to 2018.

All subsidiaries performed decent in 2019, except for Energy. This concerns the Canadian oil company Husky, which is a disaster. However, Husky is only a few percent of the overall conglomerate in any way you want to measure.

CKH's borrowings are high, but the maturities are staggered over the next 10 years. Interest and repayments seem well covered by the free cash flows. With assets such as toll roads, harbours, waste processors, water and electricity suppliers any default seems unlikely. These are also the type of assets that I expect to weather the current crisis, even if it takes longer as we expected.

I bought CK Hutchison as a cornerstone for my portfolio with the intention to hold it for the long term.

Some more background from external source:
https://valueinvestasia.com/here-is-what...dings-ltd/

 
haha i was also thinking along these lines a week ago, i.e " . As stated earlier, I will not pretend that I am able to value this complicated conglomerate in all details"

But it does look cheap statistically

But eventually i decide that if i were to choose between CKH or BRK, i would go for berkshire

[jaco]

[quote pid='157090' dateline='1585280586']
But eventually i decide that if i were to choose between CKH or BRK, i would go for berkshire
[/quote]

You don't have to chose. BRK is also on my watchlist, but it's not as obviously cheap as CKH at this point.

[jaco]

There was a lot of attention for the Jardine Group last week, but in the meantime HK's other big conglomerate CK Hutchison also reported its results for 2020:  https://www.ckh.com.hk/en/ir/announcements.php  Obviously, the results were bad due to the lockdowns, but no real surprises for those who have been following the company.

Husky Energy has been taken over by Cenovus Energy in exchange for shares in the latter. CK considers this an investment and energy is not listed as a core business on the website any longer.

A good analysis of CK Hutchison was posted on Seeking Alpha: https://seekingalpha.com/article/4415500...er-you-buy

This article attempts to calculate a valuation too. I agree with its conclusion: CKH is an undervalued conglomerate that has significant upside with a low downside.

Note: sibling-company CK Asset Holdings reported some assets reshuffling with the Li Ka Shing Foundation which seem material. I am not a shareholder in CK Asset.

[soros]

The aastocks website shows the NAV for CKH has been rising over the last 5 years from $102 to $128.

But the dividend payments for 3 yrs out of 5 years have been rising but during last 2 years been in declining trend from $2.68 - $2.85 - $3.17- $3.17- $2.31.

Share price is around $61 ( 25 Mar 2021) and UBS sees the target price at $76.

[thinknotleft]

CKH's dividend policy is X% of their earnings. Their 2020 earnings are affected by Covid 19 (Watson) and they took an large impairment loss on Husky Energy. Due to the lower earnings in 2020, their dividend in 2020 was also lower.

Their 2021 earnings should be better than 2020, as the 2020 impairment loss on Husky will not be there and Watson's earnings will not be as badly hit as in 2020.

If CKH can get back to 2019's earnings (eps of 10) and with current price of $61, the PER will be 6.1.