CNGKY - CK Asset: Management Has Undermined Confidence In Its Asset-Light Recurring Profit Model
2024-07-10 16:12:17 ET
Summary
- Hong Kong's economy is in rough shape now, with retail sales turning down, housing prices down double-digits, and office vacancies at 20-year highs.
- I believe CK Asset's management has made a tough situation worse, with a poorly explained dividend cut that undermines confidence in the recurrent free cash flows of the business.
- Management has also opted to sell units in a new residential development below their cost and at a meaningful discount to surrounding properties, suggesting low confidence in the market.
- Long-term core earnings growth of around 3% can support a substantially higher share price, and CK Asset should benefit from future rate cuts, but rebuilding investor trust could take some time.
CK Asset Holdings ( OTCPK:CHKGF ) (1113.HK) was supposed to be a go-to name among Hong Kong developers during the tougher times, as the company’s asset-light (or “lighter”, at least) model focused on recurrent revenues and cash flows was supposed to offer more security and flexibility during downturns. And indeed, conditions in Hong Kong remain tough, with housing prices down double-digits in Q1’24 and office vacancies at or near their highest level in 20 years....
CK Asset: Management Has Undermined Confidence In Its Asset-Light, Recurring Profit Model