CK Infrastructure to See Gain With Cheung Kong Group Sale of Northumbrian Water

The Cheung Kong group is selling 25% of Northumbrian Water for around a 47% premium to the estimated year-end regulated asset value, or RAV, of GBP 4.75 billion. This is above our base-case valuation for the asset but in line with recent premiums and leads to a nice gain of around HKD 0.9 billion for CKI Holdings. The sale will leave CK Infrastructure, or CKI, with a holding of 39% in Northumbrian Water, down from 52%, Power Assets Holdings with 6% from 8%, and similar pro rata reductions for CK Asset Holdings to 27% and CK Hutchison Holdings to 3%. We believe the selling price is fair for a minority stake. We leave our fair value estimate unchanged at HKD 62 and see value in CKI. Outside of the one-off gain, there is minimal impact to CKI’s earnings outlook.