Sir Li Ka-Shing (李嘉诚) is the richest person in Hong Kong for decades, earning a nickname of “Superman Li” for his reputation in the business world. He was born in 1928 in Chao Zhou (潮州) of China (Dr Tee visited there several years ago, Li Ka-Shing donated a lot of money to his hometown), therefore 92 years old so far. Technically he has retired but mentally never stop working for 1 day, still an advisor to his children and his beloved Cheung Kong Holdings.

Cheung Kong Group is famous initially as a property company, then expanding over the decades, becoming a multinational conglomerate with diversified businesses. CK parent stock is assigned #1 stock ticker in HKEx stock exchange (长江一号), showing its strength as a Hong Kong blue chip giant stock. In Year 2015, there is a major restructuring of Cheung Kong, merging with Hutchison Whampoa, forming a new company Cheung Kong Holdings (registered in Bermuda, could be due to long term planning) with 2 main companies with 2 stocks:

CK Hutchison (CKH) – (HKEx: 1) – For non-property related business

CK Assets (CKA) – (HKEx: 1113) – For proper related business

This way, it is clearer to investors on choices of investment based on these 2 divisions. However, the reorganization has affected the long term analysis of Cheung Kong as there are significant relocation of assets between 2 divisions of companies.  Therefore, it is a born of 2 “new” companies with 5 years of history in integrated business reporting but share price of CKH is much longer due to its extension of former parent stock, providing additional references on share prices.  It is important for a smart investor to analyze each segment of business for both CK companies before making decision of which stock to invest.

In fact, CK Holdings have at least 11 stocks listed within the group (only 5 highlighted ones are giant stocks):

1) CK Hutchison (CKH) – (HKEx: 1) – CK Parent Giant Stock (Non-property Division)

2) CK Infrastructure (CKI) – (HKEx: 1038) – Utility Parent Giant Stock

3) Power Assets (PA) – (HKEx: 6) – Utility Subsidiary Giant Stock

4) CK Life Sciences – (HKEx: 775) – Biotechnology Stock

5) Tom Group – (HKEx: 2383) – Chinese language media stock

6) HPH Trust – (SGX: P7VU) – Port Trust Stock

7) Husky Energy – (TSE: HSE) – Energy stock listed in Canada

8) CK Assets (CKA) – (HKEx: 1113) – CK Parent Giant Stock (Property Division)

9) Fortune Reit – (HKEx: 778) – CK Giant Reit

10) Hui Xian REIT – (HKEx: 87001) – CK Reit

11) Prosperity REIT – (HKEx: 808) – CK Reit

Out of 10 CK stocks, there are 4 giant stocks included in 50 Hang Seng Index component stocks: CKH, CKA, CKI and PA.  So, technically Superman Li could move Hong Kong stock market (about 4%).  This is similar to “rival” Jardine Group, could move Singapore Straits Times Index (about 15%) with 5 component stocks. In 1980s, Li Ka-shing was aiming to “invest” more in Hongkong Land of Jardine Group but was defeated by cross-shareholding structure of Jardine (another long story, read Dr Tee earlier article on Jardine Group of 7 giant stocks).

Not all the 10 CK stocks are strong based on Dr Tee giant stock criteria. There is only 1 more giant CK subsidiary stock, Fortune Reit is a giant Reit (formerly dual listing, after delisting from SGX, now only listed in HKEx).

So, additional comments will be given below on these 5 giant CK stocks from different businesses. An investor may select either the parent group (CKH or CKA) if want to consider average of entire group business (non-property vs property) as if a fund, or focusing on smaller individual stock of subsidiaries (CKI, PA, Fortune Reit) on specific business segment.

1) CK Hutchison (CKH) – (HKEx: 1) – CK Parent Giant Stock (Non-property Division)

CK Hutchison has 5 main business segments in non-property division. Investing in CKH stock means investing in all business segments.

1.1) Port

The port businesses are relatively stable in the past but Coronavirus crisis in Year 2020 would affect the results for Year 2020. HPH trust (not a giant stock with limited business potential) is only a small part of CK port business.

1.2) Retail

Major business is Watson for health and beauty (15794 stores with 12 brands worldwide). Business growth in China and Asia are faster than in western world. This is consumer related business, therefore Coronavirus would seriously affect the business for a few quarters. Temasek is also a shareholder for Watson, was planning to sell it.

1.3) Infrastructure / Utilities

This is main passive income generator for CKH. More details later under discussions of subsidiary giant stocks CK Infrastructure and Power Assets.

1.4) Telecommunication

This segment of business is growing in general, having mixed performance in different countries. It is a more defensive business.

1.5) Energy / Investment / Others

Energy segment is making losses while other remaining business is less significant to contributing to entire group.

CKH business (non-property) is not as defensive as CKA (property), therefore over the past 5 years since the group reorganization, share price has been dropping to nearly to 1/3 from peak of $120 to $45. Despite the Price to Book (PB) ratio is 0.5 but the asset is non-property, not as high quality.  The main investing advantage for CKH is low optimism level < 25%, aligning to global stock crisis (following economic cycles) but it could suffer in business during Coronavirus crisis due to global lockdown.

Dividend yield of 5.7% is attractive but investors may need to prepare for potential 50% cut as the worst case scenario (despite CKH has good track record of consistent dividend payment) during the winter time of CKH business, implying 3% yield which is still better than holding cash with 1% interest for cash deposit in bank.  CKH has significant business in Europe, when economy is restarted, CKH quarterly business performance would improve gradually.

2) CK Infrastructure (CKI) – (HKEx: 1038) – Utility Parent Giant Stock

3) Power Assets (PA) – (HKEx: 6) – Utility Subsidiary Giant Stock

Both CKI and PA stocks may be studied together as CKH owns CKI, then CKI owns PA, all inter-related, just different ways of grouping. So, an investor may decide investing in parent company or subsidiary business specifically in utilities.

CKI has many global businesses of infrastructures and utilities (electricity, water, gas), holding strategic asset of certain countries and cities (eg. main electricity supplier of London). Power Assets invests mainly in electricity, eg. providing partial electricity supply to Hong Kong, duopoly with another giant electricity stock, China Light and Power, CLP (HKEx: 2). Readers may guess if CKH could get HKEx stock ticker #1, CLP could get stock ticker #2, implying it is another blue chip stock with proven history (if there is a chance, we may share further on CLP or other monopoly stocks in future).

Utilities business are defensive as people may not need to shop during Coronavirus pandemic or global financial crisis but they still need basic usages of electricity, water and gas. So, utilities or infrastructure related stocks usually show their strength during economic crisis as defensive stocks which could still pay dividend with steady cash flow generated, then gradual capital gains in longer term with recovery and subsequent growth of economy.

In general, both CKI and PA are having close performance in stocks, prices have dropped by half over the past 5 years (more defensive than parent stock CKH which dropped to nearly 1/3 from the peak price), dividend payment has been stable due to defensive industry, current dividend yield is over 5%.  The main “risk” of both stocks is bearish price trend over the past few years (despite at lower optimism level, buy low may still get lower in prices), not so much on business risks (minimal), therefore investors who are reluctant to catch the falling knife in prices, may wait for uptrend in prices, sacrificing passive income (dividend yield) with higher price to exchange for confirmation in price reversal to bullish range.

4) CK Assets (CKA) – (HKEx: 1113) – CK Parent Giant Stock (Property Division)

CK Assets are property-based businesses, listed as a new stock, therefore only having 5 years of share price history so far which are more defensive than CKH (dropping to 1/3), but price is cyclic in nature, dropping to half price. Price to Book (PB) ratio is also coming to a new low of 0.5, having 50% safety margin for high quality asset of property. 

However, Hong Kong property market (about 20 years for 1 market cycle) has been at high optimism after the average prices gone up by 4 times over the past 2 decades. Therefore, property stocks in Hong Kong in longer term, may suffer “loss” in valuation due to lower property prices if there are any crisis related to China or Hong Kong property bubble.  CKA at current price is 50% discount but “rival” property stock, Hongkong Land has 75% discount with PB around 0.25. So, after relative comparison with peers, CKA 50% discount in price may not be excellent.  In fact, there are many other property giant stocks in Hong Kong which are “cheap and good”, readers may learn from Dr Tee to explore more in future.

5) Fortune Reit – (HKEx: 778) – CK Giant Reit

There are 3 REITs listed from CKA parent group: Prosperity Reit and Hui Xian Reit are relatively weaker, so we focus only in Fortune Reit.  Previously, Fortune Reit has dual listing in both HKEx and SGX but now only left HKEx. There is little difference to Singapore investors as there is no capital gain tax nor dividend withholding tax for Hong Kong stocks, except HKD/SGD is currently at high optimism (HKD is pegged to USD, similar trend for USD/SGD), future potential forex loss (when USD or HKD is depreciated vs SGD) could be compensated by dividend and capital gains of Hong Kong or US stock.

Fortune Reit drops over 40% in share price over the past 2 months of global stock crisis, resulting in high dividend yield of 7.4% with consistent dividend payout of its REIT portfolio. Risks of Coronavirus is minimized as China / Hong Kong conditions are much better than the rest of the world. Social unrest (eg. Hong Kong protesters last year) is also a lower risk now. The REIT is protected by Price-to-Book (PB) ratio of 0.4, rare for a strong REIT with 60% discount, implying under the worst case scenario, even if the company goes bankrupt, investors could still get back the capital (unlike other investors would suffer permanent loss buying stocks with low quality assets).  Usually PB is not a strong criteria for REIT, consistent rental collection from tenants is more important which Fortune Reit has a good track record. The REIT manager is also another familiar name: ARA Asset Management, used to be a giant stock with good reputation in Singapore but delisted several years ago (not surprise as this company is too good to share in long term with the public).

In short, investing in Fortune Reit could receive the protection from sponsor, CK Group, in addition to 60% safety margin in share price to property asset value. REIT (rental payment) could be more predictable than property-based business (eg. parent company CKA) which may suffer when property value declines. For a reit, even property value may decline, rental won’t fall as much, especially if located in strategic places with higher populations.

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If you could read until this line, it means that you are a serious investor as Dr Tee has spend half a day to write this article, you only need less than 30 min to read but need a few more days to digest to align the right CK stocks (1 of the 5 giant stocks) to your own personality. Each of the 5 CK giant stocks has its own pros and cons, may not be suitable for everyone. Overall, they all are at low optimism < 25%, implying higher potential for longer term investors. Their main “risks” may not be on business (Coronavirus could affect for Year 2020 but may not for long term), but more on bearish stock price trends since the group reorganization in 2015 till now. Global investors still try to find a sweet spot of balance between price and value for the “new” CK group of stocks.

Cheung Kong has been blue chip stocks for decades in Hong Kong, paying consistent dividend despite bearish stock prices or fluctuation in businesses. The main intangible “asset” of CK Group could be Li Ka-Shing, a trusted icon of CK for decades. Despite Mr Li has retired, he has transferred his business and investment knowledge to his 2 sons, Victor Li (taking over his empire of CK business) and Richard Li (inheriting most of his cash to start own business beyond CK Group). This way, 2 “tigers” won’t be in same jungle (only 1 main decision maker), smart move by a father with far vision to minimize potential family conflicts in the same business.

So, if readers may not have the same wisdom as Li Ka-Shing on investing, we may leverage on him through investing in CK group of giant stocks at lower optimism prices. Li family are unlikely to sell their stocks, therefore they would work day and night for you to grow the business as they are major shareholders (interest is aligned). Better still, readers may contribute no effort except just capital for investment at the right price (ability to press the button when seeing the signal with strategy aligning to own personality), Li family could then work for you for another generation until Victor Li may retire one day as well or passing to the third generation. Of course, you may then sell the stocks for capital gains one day or transfer the stock to your own second generation to keep.

If readers worry Li Ka-Shing may go bankrupt during global financial crisis (he went through at least 9 times over his 92 years of life experience), then smart investor may look for Top 10 richest persons in the world (Li Ka-Shing is only the 30th richest in the world), investing in their best stocks with stronger business than CK Group, forming a portfolio of Top 10 richest person’s giant stocks as a dream team portfolio.  Of course, you may not get a good discount in share prices when their businesses are very strong now, therefore stock “crisis” is usually a good opportunity to own some of these giant stocks with growing businesses.

Li Ka-shing stocks are stronger than many 50 Hang Seng HSI index component stocks or 30 STI index component stocks (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

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