According to a Daiwa research report, Hutchison Ports (00001.HK) was ruled unconstitutional last week by Panama's Supreme Court regarding its port concession agreement, causing declines in the share prices of both CK Hutchison and Cheung Kong Infrastructure (01038.HK). The firm believes that the ruling likely stems from geopolitical tensions between the U.S. and China over strategic assets, potentially disrupting CK Hutchison’s planned sale of its global ports business to Blackrock.
For Cheung Kong Infrastructure, the firm considers this event as primarily exerting sentiment-related pressure, highlighting risks of political scrutiny, though it has no direct impact on the company’s profit base, given its operations are mainly concentrated in regulated utilities in the UK and Australia.
Considering that favorable factors such as regulatory resets and the sale of its UK railway business have already been priced into the stock, the firm views its fundamentals as unchanged, but with limited upside potential. Additionally, given that its dividend yield is now close to industry peers, the rating has been downgraded from 'Buy' to 'Outperform,' while the target price has been raised from HKD 63.5 to HKD 66.3.
