King's Finance News | CKI Holdings Limited
CHEUNG KONG INFRASTRUCTURE HOLDINGS LTD.

Stock Code: 1038
PE Ratio: 16 times
Dividend Yield: 5%
Earnings Per Share: 3.19
Market Cap: $130 billion
Business Category: Infrastructure
Chairman of the group: Li Ka-shing
Major shareholder: CKI Holdings Co., Ltd. (0001) (75.7%)

5-Year Performance
Years: 2019/2020/2021/2022/2023
Earnings (billion): 67.3/71.8/70.5/66.2/60.0
Profits (billion): 105/73.2/75.2/77.5/80.3
Earnings per share: 4.17/2.91/2.98/3.08/3.19
Dividend per share: 2.46/2.47/2.50/2.53/2.56
ROE：9.60／6.56／6.61／6.58／6.62

--Company Profile--

长江基建（长建）是香港具规模及多元化的上市基建公司，并在国际基建业稳据重要地位。核心业务包括：能源基建、交通基建、水处理基建、废物管理、转废为能、屋宇服务基建及基建有关业务。

长建的营运范围遍及香港、中国内地、英国、欧洲大陆、澳洲、新西兰及加拿大。

--企业发展--

【图1】--长建业务简介

[Chart 2] - 10-year financial data

Cheung Kong Infrastructure holds a stake in Power Assets (0006) of more than 30%, while Power Assets spun off Hong Kong Electric (2638) as an independent listed company in January 2014, bringing approximately 19 billion yuan in one-time special income to CKI Holdings, indirectly leading to CKI Holdings reducing its business in Hong Kong and positioning itself more internationally.

Initially established as a company focused solely on the Greater China region, CKI Holdings engaged in cement production, power plants, and toll road operations in Hong Kong and the mainland.

Subsequently, its business expanded into other sectors and regions, making it one of the leading global infrastructure enterprises with a diverse investment portfolio including electricity, gas, crude oil transportation, water affairs, transportation, infrastructure materials, waste management, and building services infrastructure businesses; projects span across Hong Kong, mainland China, the United Kingdom, mainland Europe, Australia, New Zealand, and Canada.

Many of these projects have been developed through acquisitions, with the overseas business performing exceptionally well, notably with UK operations contributing the largest share of profits, accounting for over half of the total profits.

In recent years, CKI Holdings has made three major acquisitions, including the acquisition of DUET, Australia's largest diversified public utilities listed company at the time, Reliance Home Comfort, Canada's largest hot water boiler and related equipment leasing company, and ista, a German sub-metering, water and heating energy data collection and billing service provider. After the acquisitions, CKI Holdings' business began to expand into the building services infrastructure sector.

- Expanding through acquisitions and partnerships -

【Figure 3】- The acquisition process of CKI Holdings in the past.

From the past profits and business revenue of joint ventures, it can be seen that CKI Holdings can maintain growth. This is the result of the expansion of revenue attributed to many joint ventures, utilizing cooperation and acquisitions to keep the company growing.

It can be seen that CKI Holdings uses joint ventures as the main growth driver. Although the accounting numbers do not reflect joint ventures with less equity, cooperation and investment have become its growth model. Besides various forms of cooperation, various acquisition methods are also used to strengthen CKI Holdings.

Although CKI Holdings is involved in multiple business categories, many of which are related to public utilities, hence often generating continuous and stable cash flow after acquisitions. For experienced CKI Holdings, it is relatively easy to calculate future cash flows, assess risks, and estimate values​​.

- Balancing Risks in Expansion -

In future development, although acquisitions are not the entire analysis of the company, acquisition business will still be a direction for development, therefore, it will always have an impact on long-term development. However, investors find it difficult to know about future acquisition projects, so they can only rely on the management team.

The management team stated that CKI Holdings will adopt three key strategies: (1) Continuously explore acquisition opportunities; (2) Promote internal growth of existing businesses and new acquired businesses; (3) Strengthen robust capital strength to allocate resources for internal growth and external acquisitions.

In terms of dividends, it has been increasing for over twenty years, with a quite ideal return on dividends, reflecting the continuous increase in the company's value, as well as the continuous creation of growing cash flows.

However, it is important to note that CKI Holdings has always focused on acquiring developed countries (such as Europe, Australia, Canada) related to people's livelihood. In recent years, Western countries are not very willing to let some of the people's livelihood and sensitive businesses be operated by Chinese companies, making acquisitions more difficult and potentially discounting growth prospects.

[Figure 4] - CKI Holdings' dividend chart over the years

- Comprehensive Analysis -

Overall, CKI Holdings is a good company with a certain scale, and its assets are also of a certain quality. Its past development has been good, with the ability to develop steadily and the return on reinvestment not bad. Expanding into new businesses also helps to balance the risk-return relationship, overall exhibiting a considerable level of quality.

However, being a large-scale company, asset protection issues in many countries have somewhat weakened the company's growth potential.

It should be noted that CKI Holdings has many businesses in the United Kingdom and Europe, where the local economy is relatively average, inevitably causing some impact. However, as CKI Holdings still has assets in other countries, the impact is considered moderate, not comprehensive.

-- Investment Strategy --

Due to the company's established scale and prudent style, the development speed will not be too fast. However, steady growth poses no problem. I believe that the cash on hand will gradually acquire other overseas businesses, with a current P/E ratio of 16 times and a dividend yield of 5%, which is in the upper range of a reasonable level.

If you are an investor seeking income and stable returns, I believe this stock is a suitable choice. In the past, it has performed well in terms of stock price and dividend appreciation. The dividend is good, and investors should focus on the longer-term stock price and future dividends, but it may not necessarily be a high-growth type.

(I am a licensed securities professional and do not hold the above-mentioned stocks. The above article is just an analysis of the company and does not constitute any investment invitation. Before investing, investors should take the time to study the company themselves to decide if it is suitable for them.)

【Author Introduction】Gong Cheng
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