Li Ka-shing Dumped China for Overseas Investment

CKI outperformed HPH Turst - since HPH Trust listed in 2011
　

Tycoon Li Ka-shing announced to buy Dutch waste and energy company AVR Afvalverwerking BV for 9.8 billion dollar (US$1.3 billion)

By Huang Huiming Epoch Times Staff

Hong Kong tycoon Li Ka-shing’s companies announced to buy Dutch waste and energy company AVR Afvalverwerking BV for 9.8 billion Hong Kong Dollar (US$1.3 billion) last week, which made his total investment in overseas assets in the last three years exceeding 160 billion Hong Kong Dollar (US$20.6 billion), with the majority concentrating in Europe and Canada.

Three listed companies controlled by Hong Kong’s richest man including Cheung Kong Infrastructure Holdings Ltd. (CKI 01038), Cheung Kong (Holdings) Limited (SEHK 00001) and Power Assets Holdings Limited (00006) made the announcement.

Cheung Kong Group abandons Chinese market for overseas

Since Li has his heart set on China and Hong Kong, why would he transfer his funds overseas? In fact, take CKI, which often invests overseas, for example, its performance and share prices outperform the other companies within the group. In the past five years, its share price doubled, while the prices for SEHK and Hutchison Whampoa Limited (HWL 0013) only grew by 6 and 13 percent respectively. CKI clearly outshines the others and made great achievement by catching up its market value to more than half of that of Li’s flagship SEHK.

On the contrary, Hutchison Port Holdings Trust (HPH Trust), which was separated out by Li in March 2011, had its share price plummeting. Its business covers mainland China and Hong Kong only, with mainland China takes up 54 percent and Hong Kong 46 percent. This is calculated based on last year’s revenue. Even with the four received dividends, its shareholders are still in the red.

The lesson here is not to rush in getting what Li sells out. Take a look at Chow Tai Fook Jewellery Group Ltd. (01929), Cheng Yu-tung waited till the end to list it, yet it faced big industry adjustment as soon as it got listed, its current price falls forty percent from its listed price.

Interestingly, many of recent properties purchased by Cheng are from Europe and North America. For example, in July 2011, Cheng acquired five luxury hotels in North America with 4.4 billion Hong Kong Dollar (US$0.57 billion), including the landmark of Manhattan - New York Carlyle Hotel.

Looking back, the economy in mainland China and Hong Kong indeed slowed down by quite a bit in recent years. Less than 40% of university graduates in mainland China can find a job, reflecting the severity of economic saturation, the inability to accommodate more talents in the society. Not only the people, but local governments are also claiming lack of funds, the economic momentum cannot compare with that of five years ago. A and H shares are at a loss, problems are abundantly clear.

The focus of Hong Kong financial market is that tycoons like Li Ka-shing definitely know the political and economic situations of mainland China better than anyone else. Li’s continuous transfer of large amount of funds overseas alerted the investment market and triggered speculation on the true political and economic situation in mainland China.

Listening to Li’s speeches can often be confusing, it is better to look at what they are actually doing. In the view of Cheung Kong Group, China is definitely not a good market, so investors better watch out this warning sign.

Cheung Kong Group has high debts capacity

Compared to the other two common shares, Cheung Kong Infrastructure (CKI) Holdings and Power Assets Holdings Limited have smaller debt-asset ratio, thus have greater ability to issue additional bonds to support acquisitions. At the same time, the dividend payouts of these two companies have never disappointed shareholders. These two companies have persisted paying dividends for a very long time. Since the first day when they were recorded in Bloomberg L.P., their dividend payouts have never been suspended in a year.

Most market analysts believe that the overseas incorporation activities of CKI can benefit shareholders, and help enhance stock values. Macquarie Group said that CKI’s acquisition record is impressive, and Merrill Lynch said that the merger of the Dutch AVR is attractive due to its price. JPMorgan Chase is excited about its first foray into the EU area.

It seems that Li is moving all his properties to overseas. Several years ago there was a rumor abroad that Cheung Kong Group intends to sell Husky Energy, but it was left unsettled in the end. Do not forget that this is a Canadian business, so maybe the answer is that “no need to be in such a hurry”.