CK Asset: Reinitiating Hong Kong’s Leading Developer With a No-Moat Rating; Shares Underpriced

We reinitiate CK Asset with an HKD 37 per share fair value estimate, no-moat rating, Standard Capital Allocation Rating, and Medium Morningstar Uncertainty Rating. CK Asset was established in 2015 when Cheung Kong Holdings spun off its property holdings, and it remains one of the largest property developers in Hong Kong. Despite weak home demand during the market downturn, CK Asset’s recently launched projects were well-received by homebuyers, thanks to interest-rate cuts and affordable pricing. While we expect the company’s top line to be materially boosted by new project completions in the next few years, the subdued margins of units sold will likely dilute its profitability. This could be partly offset by recurring earnings growth from its property rental and infrastructure businesses. Given that, we expect CK Asset’s operating margin to decline to 13.9% in 2028 from 16.8% in 2023. The company’s shares are trading in 4-star territory, and we think the current share price implies an attractive 2024 dividend yield of 5%.