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CK Hutchison: What Longleaf Thinks About Hong Kong Conglomerate

CK Hutchison Holdings Ltd (HKG: 0001), a Cayman Islands-registered multinational conglomerate headquartered in Hong Kong, focuses on ports and related services, retail, infrastructure, energy, and telecom businesses. The company’s stock fell nearly 24% in 2018 but since the start of this year, shares are in the green.  Longleaf Partners Fund, a suite of mutual funds and UCITS funds managed by Southeastern Asset Management, discussed CK Hutchison in its latest letter to investors. Let’s take a look at the fund’s comments:

CK Hutchison (-21%, -1.53%, -17, -1.16%), a Hong Kong based conglomerate of telecommunications, health & beauty, infrastructure, global ports and energy, fell during the final quarter and the year.

While a trade war between China and the U.S. will pressure less than 5% of its Ports business, concerns of this trade tension generated broad negative sentiment around Asian stocks.

In Italy, the company’s Telecommunications business struggled as a tough macro environment and increased competition from a new entrant pressured prices. In the second half of the year, declining oil prices impacted Husky Energy, the Canadian energy associate of CK Hutchison. These short-term headwinds negatively impacted sentiment, but the overall company’s cash flow, as well as management’s capital allocation decisions, helped our appraisal grow in the mid-single digits for the year.

Chairman Victor Li sold CK Hutchison’s interests in several infrastructure projects at 12X EBITDA and redeployed the proceeds to acquire the Italian telecom joint venture at 5x EBITDA. The company also repurchased its discounted shares for the first time in almost two years.

Credit: CK Hutchison

Credit: CK Hutchison

In the latest news, CK Hutchison Holdings Ltd (HKG: 0001) subsidiary Hutchison Drei secured the first Austrian 5G license. Reuters is reporting that Austria on March 7 awarded licenses to Hutchison Drei, Deutsche Telekom’s T-Mobile, and Telekom Austria’s A1 in the country’s first 5G auction.

Shares of CK Hutchison Holdings are up more than 9% year-to-date. The stock has fallen 10.01% over the past six months and 15.91% over the past 12 months.

Meanwhile, don’t miss reading Longleaf’s comments on General Electric and Park Hotels & Resorts.

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