Goldman Sachs: CKH Holdings (00001) Stable Growth in Various Businesses, Asset Sales Help Reduce Debt.

Goldman Sachs released a research report stating that CKH HOLDINGS (00001) 2025 performance meets expectations. Excluding a one-time loss of 10.5 billion Hong Kong dollars due to the merger of 3UK and Vodafone in the UK, the basic net profit is 22.3 billion Hong Kong dollars, a year-on-year increase of 7%, in line with the bank's and market expectations. In local currency terms, the group's EBITDA increased by 7% year-on-year, with stable performance in various businesses. The group announced a final dividend of 1.6 Hong Kong dollars, with a full-year dividend of 2.3 Hong Kong dollars, a 5% year-on-year increase, maintaining a stable payout ratio of approximately 40%. Goldman Sachs noted that CKH HOLDINGS' net debt to net capital ratio improved further from 16.2% at the end of 2024 to 13.9% at the end of 2025, the most robust level since 2001. Taking into account the cash proceeds from the sale of the UK railway and the proposed sale of UKPN by Cheung Kong Infrastructure, the estimated net debt ratio is expected to further decrease to 7%. Due to the Middle East conflict and geopolitical risks, CKH HOLDINGS management maintained a cautious outlook on business prospects at the analyst meeting. However, they expect the port business to mitigate uncertainties through diversification of global port portfolios in other regions, anticipating a slowdown in global trade growth amid macro uncertainty. In terms of telecommunication business, integrating 3UK and Vodafone business is a top priority, with the current plan to achieve the target of 700 million pounds of annual cost and capital expenditure synergies in the fifth year after the merger. Management also mentioned seeking to introduce new services such as energy, insurance, fixed wireless access, and travel eSIM to drive growth. Considering the trend from the beginning of the year, the proceeds from Cheung Kong Infrastructure's UK railway sale, and the latest forecast for its core business, Goldman Sachs raised CKH HOLDINGS' earnings per share forecast for this year by 11% and maintained it for next year, while introducing a forecast for 2028. For the entire group, Goldman Sachs predicts a 16% year-on-year increase in core earnings to 25.9 billion Hong Kong dollars in the 2026 financial year for CKH HOLDINGS, driven mainly by the gradual realization of synergies from the UK merger in the European telecommunications business and the benefit from rising oil prices for Canadian energy company Cenovus Energy. Sensitivity analysis shows that Goldman estimates a $1 increase in oil prices would boost CKH HOLDINGS' profit by approximately 300 million Hong Kong dollars or 1 to 2%. No rating was given for CKH HOLDINGS.