Thanks for the great write up. I’m not sure if I’m interpreting it wrongly, but it seems like based on the history of acquisitions they’ve only made money on one or two deals, with the valuations of the rest being significantly lower than the original purchase price? While certainly cheap based on SOTP, it does give one slight concern regarding their capital allocation ability.
Hey, nice write-up. I have a question here: "Total value of 174.3B vs market cap of 107B." Is it a mistake? Shouldn't the market cap be around 140B HKD?
Hi Bogda, always good to ask a question. Looking at shares outstanding in the annual report and multiplying with the share price I come to 104B HKD. Price moved a bit since writing.
You might have looked at CK Hutchison. A related company with no real estate exposure (disc: long). Wrote about them recently as well. CK asset has a 104B market cap at Google Finance.
I was surprised that CK Asset is fairly valued on it's international non real estate assets (using these multiples). That being said I don't see much reason for optimism in HK real estate stocks yet. If you want to start accumulate early than this might be a good time.
Hard for me not to buy additional CK Hutchison as well.
Thanks for the great write up. I’m not sure if I’m interpreting it wrongly, but it seems like based on the history of acquisitions they’ve only made money on one or two deals, with the valuations of the rest being significantly lower than the original purchase price? While certainly cheap based on SOTP, it does give one slight concern regarding their capital allocation ability.
The easy answer is yes. Returns have not been great. However Returns look especially poor since:
1. I use low multiple in my valuation (prices which I find attractive). Competitors more often than not trade at higher multiples.
2. My valuation does not take into account the distributions from the acquired assets, which is significant given the type of assets.
Other points worth mentioning:
3. The dollar and HKD have been fairly strong diluting performance of assets in other currencies.
4. Company has divested some Hong-Kong/Chinese real estate. So returns are a lot better than if the company stayed focused on Chinese real estate.
5. Higher interest rates are not helpful given the type of assets.
Hey, nice write-up. I have a question here: "Total value of 174.3B vs market cap of 107B." Is it a mistake? Shouldn't the market cap be around 140B HKD?
Hi Bogda, always good to ask a question. Looking at shares outstanding in the annual report and multiplying with the share price I come to 104B HKD. Price moved a bit since writing.
How do you arrive at 140B?
Just looked at yahoo finance, Google finance and tradingview, didn't do the calculations. I will look it up, thanks👍
You might have looked at CK Hutchison. A related company with no real estate exposure (disc: long). Wrote about them recently as well. CK asset has a 104B market cap at Google Finance.
You are right, rookie mistake. Thanks a lot again🙏
No worries. It is actually a quite common mistake. Mostly the other way around. A lot of people think that CK Hutchison is in Hong Kong real estate.
interesting read
I was surprised that CK Asset is fairly valued on it's international non real estate assets (using these multiples). That being said I don't see much reason for optimism in HK real estate stocks yet. If you want to start accumulate early than this might be a good time.
Hard for me not to buy additional CK Hutchison as well.