CK Hutchison Holdings ADR (CKHUY) is the holding company for the diversified interests of Hong Kong’s wealthiest man, Li Ka Shing, notes Gavin Graham, contributing editor to The Income Investor.
It owns the world’s leading ports network, with interests in six of the 10 busiest container ports in the world. This is achieved through its 80% interest in the Hutchison Ports business and its 30% interest in the HPH Trust, which together have interests in 52 ports in 26 countries with 291 berths.
These handled 88 million twenty-foot equivalent units (TEUs) last year. Its A.S. Watson retail division is the world’s largest Health and Beauty retailer, with a 142 million loyalty member base. It operates 12 retail brands with 16,398 stores in 28 markets worldwide.
The company’s 75.7% stake in CK Infrastructure, the largest listed infrastructure company on the Hong Kong Exchange, comprises interests in energy, transportation, water infrastructure, waste management, waste-to-energy, household infrastructure, and infrastructure-related businesses. It operates in Hong Kong, mainland China, the UK, Australia, New Zealand, Canada, and the US.
Finally, its 3 Group Telecom subsidiary has 38.5 million active mobile users in Europe, where it operates in the UK, Italy, Sweden, Denmark, Austria, and Ireland. It has 3.2 million users in Hong Kong and Macau, and 56.2 million in Hutchison Asia Telecom, which operates in Indonesia, Vietnam, and Sri Lanka. CKH also has a 15.1% stake in Cenovus Energy (CVE), which it received after it merged Husky Energy with Cenovus at the end of 2020.
CKH is very well diversified both geographically and by type of business. It gives investors exposure to both relatively stable, if slow-growth, businesses like power and water companies and drugstore chains, along with more economically sensitive operations such as container ports and mobile phone networks.
Despite operating in areas that were amongst the worst affected by the COVID-19 pandemic lockdowns, CKH has managed to grow its revenues and earnings over the last couple of years.
CKH announced a final 2021 dividend of $0.238, an increase of 9% on 2020. Combined with the $0.102 interim payment, that gave a total of $0.341, a 15% increase for the year, equivalent to a 4.79% yield. As an ADR, the dividend will be subject to foreign withholding tax.
With COVID’s effects on the wane and global GDP growth still positive, CKH is selling at less than 6.5 times price/earnings ratio and 0.4 times price/book ratio. The stock is a very reasonably priced way to gain exposure to attractive sectors, supported by a sound balance sheet (30% debt/capital) and a rising dividend yield.
Action now: Buy now for an attractive yield and a potential re-rating.
