Still Hoping for Li Largess

(Bloomberg Gadfly) -- Hong Kong billionaire Li Ka-shing may have lost his crown as Asia's second-richest man to India's Mukesh Ambani but his reputation for smart investing is intact.

Diversification away from dependence on the U.K. (where the 89-year-old is the biggest foreign investor) seems to be working, and Li's assets there are benefiting now from a stabilizing pound. Investors may be disappointed, however, that the dividend bump wasn't bigger.

CK Hutchison first-half profit increase

7%

CK Hutchison Holdings Ltd., the flagship, reported Thursday a 7 percent increase in first-half earnings. The company managed to offset some of the damage wrought by the impact of Brexit on the pound by expanding in Italy and, more recently, Australia. (CK Hutchison derived 31 percent of its Ebitda from the U.K. in the first six months, down from 33 percent in 2016.)

Li completed his largest overseas deal this year with the A$7.4 billion ($5.6 billion) takeover of Australian power provider Duet Group, months after merging his Italian telecom business with a rival to create the country's biggest wireless provider. The Italian merger helped Li's European telecom operations post a 33 percent jump in Ebitda in the first half. 

His Cheung Kong Property Holdings Ltd. has been diversifying, too -- away from Hong Kong's profitable but volatile real estate market and into aircraft leasing last year, before joining the purchase of Duet. Hong Kong's buoyant real estate market helped Cheung Kong Property, which also reported Thursday, post a 14 percent increase in first-half earnings.

Currencies helped. The rebound in sterling from post-Brexit lows and a recovery in the euro flattered Li's companies -- they report in the Hong Kong dollar, which is pegged to the greenback.

Every analyst of 15 polled by Bloomberg has a buy rating on CK Hutchison stock. Even Li's long history of low dividends, apart from one-time handouts as he restructured his Hong Kong companies, has failed to dim the enthusiasm. So far this year, though, CK Hutchison is up 25.8 percent on a total return basis, below 28.5 percent for the benchmark Hang Seng Index.

Li's pattern of less-than-generous dividends is holding: The interim payout is to increase 6 percent to 78 Hong Kong cents, below analysts' consensus estimate of 80 cents.

When it suits the parent, however, Li's companies can be generous -- in July, CK Hutchison's 39 percent-owned Power Assets Holdings Ltd. announced a HK$7.50 (96 U.S. cents) special dividend. Time to share the largess.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

To contact the author of this story: Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net.

To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net.