CK Asset Has Rebounded, But 2025 Still Offers A Lot Of Challenges

2025-03-12 05:56:05 ET

Summary

• CK Asset Holdings' shares have risen 20% after a fall 2024 dividend cut, outperforming peers, but the Hong Kong property market remains weak with high unsold inventory and falling prices.
• Hong Kong has seen lower interest rates, but unsold inventories remain high and more supply is coming onto the market, making a price recovery in 2025 seem less certain.
• Conditions in the HK office rental market likewise remain stressed, with elevated vacancies and declines in rents.
• Growth drivers like the hotel business and infrastructure assets are undersized / not growing fast enough to significantly boost earnings; international investments could face political challenges.
• CK Asset's shares appear undervalued by 15%, with what should now be a well-covered dividend, but recovery expectations for the HK market may be overly optimistic and pressure sentiment later in 2025.

When I last wrote about Hong Kong’s CK Asset Holdings ( OTCPK:CHKGF ) (1113.HK) I was still concerned about the weak state of the Hong Kong property market and the risk of another dividend cut, even though the valuation looked too low, and in the comments to that piece I said I’d likely get more positive once that next dividend cut was in place. That cut came with 1H’24 earnings on August 15, 2024, and the shares have risen about 20% since then – outperforming pretty much all of CK Asset’s Hong Kong developer peers ( New World Development ( OTCPK:NWWDF ), SHK ( OTCPK:SUHJF ), Henderson ( OTCPK:HLDVF ), Sino Land ( OTCPK:SNLAF ), and Wharf (WARFF) apart from Kerry Properties ( OTCPK:KRYPF )....

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