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Friday, May 24, 2024

Li Ka-shing flagship firms post profit rise, showcase strength of diverse portfolio

Li Ka-shing flagship firms post profit rise, showcase strength of diverse portfolio

Li Ka-shing, Hong Kong’s richest man, has shown how a diverse portfolio of investments has helped his flagship companies thrive, even as his city was saddled by the most severe economic slump in decades during the Covid-19 pandemic.

Li Ka-shing, Hong Kong’s richest man, has shown how a diverse portfolio of investments has helped his flagship companies thrive, even as his city was saddled by the most severe economic slump in decades during the Covid-19 pandemic.

The Li family-controlled CK Hutchison Holdings beat estimates when its 2022 net profit rose 10 per cent to HK$36.68 billion (US$4.7 billion), while the combined revenue from its other businesses, which range from container ports and retail sales to telecommunications, increased by 2.7 per cent to HK$457.23 billion.

CK Asset Holdings, Li’s property flagship, said on Thursday that its net profit rose 2.1 per cent to HK$21.68 billion, or earnings per share of HK$5.98, up 3.6 per cent when compared with the previous year.

“We do not [only] do one business,” Victor Li Tzar-kuoi, Li’s elder son and chairman of CK Asset, said in a press conference after the company’s earnings announcement. “We have many choices to target different places and businesses, and most importantly the economic cycle, to flexibly allocate capital in different assets. Then you can balance the development.”

Victor Li Tzar-kuoi during the announcement of CK Asset’s 2022 results.

For example, Hong Kong’s property sector has witnessed keen competition over the last few years, with land prices surging to new highs. “We had a choice to develop elsewhere, investing in infrastructure or other projects with fixed income,” Li said. “At an appropriate time, we could even lock in returns.”

CK Asset bought 5, Broadgate in London in June 2018 and sold it for a return of some 40 per cent after three-and-a-half years, Li said. The firm’s aeroplane leasing business had also reported a double-digit internal rate of return, he added.

“So we have an ample war chest. In these few years, when Hong Kong’s land prices are more reasonable, we can buy several more projects,” Li said. “Luckily, we did not buy too many properties a few years ago, at high levels.”

In 2021 and 2022, CK Asset invested more than HK$30 billion to acquire four sites at reasonable prices through government tenders, and to secure two redevelopment projects, according to its exchange filing.

“Over time, [land] valuations have to follow offers” by developers, Li said, adding that the most important is the average land bank cost, which is very competitive currently.

CK Asset on Thursday priced the first batch of 88 flats at its Grand Jete phase two development at a discounted entry price of just HK$3.07 million for a 266 sq ft flat. The average price per square foot at HK$12,509 after discounts is the lowest in close to three years, and some 20 per cent lower than the HK$15,050 per square foot CK Asset sought for phase one in June last year, according to Centaline Property Agency.

Li said the eye-catching pricing could stimulate the market. The development – with about 60 per cent of the flats on offer selling for less than HK$4 million – is an affordable project that can cater to first-time buyers, he added.

“Hong Kong’s living space is too small compared to anywhere [else] in the world,” Li said. “Hong Kong people have been asking for more affordable housing and more people are buying their first homes.

“If we could buy cheap land, why don’t we sell flats more cheaply? Buyers are happy. We are also happy.”

Hutchison’s better-than-expected results were also helped by a strong contribution from Canadian oil and natural gas company Cenovus Energy and the successful completion of several key strategic transactions during the year, the company said.

This included a HK$15.8 billion gain from the disposal of its stake in UK cell tower assets to Cellnex completed in November 2022, and a net gain of HK$6.1 billion from the completion of a merger of its Indonesian telecommunications business in the first half of last year.

Last year was difficult and full of obstacles, but companies such as Cenovus made “satisfactory contributions”, Li said.


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