CK Hutchison Reports Strong Ports but Weak Telecom; FVE Cut to HKD 75

CK Hutchison’s, or CKH's, first-half 2022 contained many of the same themes as 2021 with the ports segment very strong, retail slightly below expectations, and the telco operations again reporting weaker-than-expected profitability. We think inflation and keen competition in the telco and retail space will eat into near-term margins. As such, we cut our fair value estimate to HKD 75 from HKD 78. CKH remains relatively attractive as a value investment but its telco segment struggles are an overhang in the absence of further consolidation in Europe. Nonetheless, CKH’s share price should find support as it trades on an attractive dividend yield of over 5% currently, coupled with an active share buyback policy.