CKI 2022 Profit Misses Mainly on Noncash Adjustments; FVE Unchanged

On first glance CKI Holdings' 2022 earnings disappointed as U.K. contributions fell short of expectations. However, the deviation is mainly due to HKD 1.3 billion in mark-to-market losses on its inflation hedges. Given our more benign inflation assumptions for full year 2023 coupled with reduced currency headwinds, we expect CKI's earnings to grow 14.5% year on year in 2023 to HKD 8,870 million. Much of its ex-U.K. contributions were in line although associate Power Assets Holdings, or PAH, also fell short due to the impact of the inflation hedges as well. We made minimal changes to our assumptions and leave our fair value estimate, or FVE, unchanged at HKD 58 pending additional tweaks when full accounts are released. Dividends grew at 1.2% year on year in 2022, in line with our expectation. At the current share price level, CKI's dividend yield is a decent 5.8% and we expect dividends to continue to grow at the 1%-2% annual pace.