Ticker: CKHUY, Buy below $15.
Why I Would Buy
- Cash Flow Generation – A hard to replicate collection of cash-flow generating assets such as ports, utilities, telecom, infrastructure assets, retail stores and more.
- Global Diversification – Revenues are generated from a highly diversified geographical base, reducing concentration and currency risks:
- Large Insider Holding – Legendary investor Li Ka-Shing and his family owns approximately 60% of the company. Minority shareholders can benefit by aligning themselves with the family’s interests.
- Strong Ratings Consensus – According to The Financial Times, of the 15 analysts covering CK Hutchison 7 held “Buy” opinion and 8 had “Outperform” opinion. None had a “Hold” rating or below.
- Extremely Cheap – Trades at about 17% discount to book and at about 7.3 times 2015 earnings.
What Could Go Wrong
- Large Beta –Ports and infrastructure businesses are strongly correlated with global trade volumes and the world economy. Even a mild recession could hit earnings hard.
- Capital Intensive Businesses –CK Hutchison operates capital hungry businesses such as ports, infrastructure, railroads, utilities etc. The large recurring capital expenditures can be a drag on returns-on-equity.
- Persona –CK Holdings is run by the highly-skilled investor Mr. Li Ka-Shing, the company benefits greatly from his tremendous business acumen; Mr. Li is 87.
Please read disclosure here before taking any action based on this post.