2020 Earnings Beat Expectations on Strong Mainland DP Margin, Proposed Buy Positive To Share Price

CK Asset Holdings, or CKA, reported higher-than-expected full-year 2020 results, underpinned by better margin on China property revenue booking, offsetting lower recurrent earnings. Core earnings totaled HKD 19.3 billion, down about one third year on year, but 8% better than our projection. Full-year dividend was HKD 1.80 per share, down 14% year on year. We rolled our model forward to account for the better margin on development properties, or DP, as well as the recently announced proposed acquisition in infrastructure assets. We maintain our fair value estimate of HKD 69, and the company's narrow economic moat rating. While the decline in recurrent earnings was disappointing, we believe the shares are trading at an attractive valuation given a strong balance sheet and scope for other capital management initiatives. The proposed acquisition will deploy HKD 17 billion in familiar infrastructure assets with accretive yield.