Li clan take a tiny step to beat China value trap

CK Infrastructure Holdings

12/07/2024 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own. Refiles to add hyperlinks and editing
credits.)
    By Chan Ka Sing
       HONG KONG, July 12 (Reuters Breakingviews) - The Li
family needs to cut many deals. Their Hong Kong-based
telecoms-to-ports-to-retail empire is stuck in a China value
trap. Patriarch Li Ka-shing and his 59-year-old son Victor, who
formally sits atop the group’s $19 billion flagship listed
company CK Hutchison  0001.HK , are taking a tiny step to
address the problem but it will be a long difficult slog. 
          A 7% jump in shares of its majority-owned unit on
Friday is a promising sign; CK Infrastructure  1038.HK  moved
upwards after the $15 billion company confirmed it is sizing up
an additional overseas listing, possibly in London. It says it
doesn't plan to raise any funds, suggesting the move is designed
to counter problems stemming from the deteriorating
Sino-American relationship rather than anything fundamental
relating to the business.   
          A secondary listing will make the company investable
for a growing class of money managers, especially U.S. funds,
that are unwilling to buy shares in Hong Kong due to
geopolitical risks. More deals could follow from the
conglomerate. CK Hutchison is reviewing options for its European
telecoms unit with a view to reducing its holdings in the
overall business, Reuters reported on Thursday, citing six
people with knowledge of the situation. 
         The UK’s new Labour government will be keen to shore up
London as financial centre so may welcome more listings from
global firms with strong Chinese connections such as CKI and
Shein. The last time the party won a landslide victory in 1997,
it coincided with the start of CK Hutchison’s continental shift
in business strategy. At the time the company, then known as
Hutchison Whampoa, derived more than 71% of its revenue from
China and Hong Kong while Europe accounted for just 12%. Nearly
three decades on, Europe contributes half of its revenue while
China and Hong Kong’s share has dipped to 14%.
        Yet efforts by the Lis to go global have exposed the
Hong Kong group to much criticism in China over the years. Now
it is stuck between a rock and a hard place. As of this week, CK
Hutchison shares trade at less than 30% of book value. There's
lots of work to do, which is bound to ruffle more feathers - and
not necessarily just at home. 
    
    CONTEXT NEWS
    Hong Kong’s CK Infrastructure Holdings, controlled by the
family of the territory’s richest man Li Ka-shing, is
considering a “potential second and additional listing” on an
overseas exchange such as London, the company said in a stock
exchange filing on July 11.
    Separately, CK Hutchison is reviewing options for its
European telcoms unit with a view to reducing its holdings in
the overall business, Reuters reported on July 11, citing six
people with knowledge of the situation. CK Hutchison owns 75.7%
of CK Infrastructure, according to data on LSEG Workspace. 

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Graphic: Li Ka-shing's empire is heavily discounted    https://reut.rs/3y1gMZy
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 (Editing by Una Galani, Antony Currie and Aditya Srivastav)
 ((For previous columns by the author, Reuters customers can
click on  CHAN/  
KaSing.Chan@thomsonreuters.com))