CK Asset Interim Results Down on Losses in Hotel and Pub Businesses, Other Segments Resilient

CK Asset Holdings reported interim core profit of HKD 8.4 billion, down more than one third year on year. The results were lower than our estimate due to larger-than-expected loss from hotel and pub operations. Interim dividend was HKD 0.34 per share, one third lower than a year ago. We updated our model to reflect the more severe decline in hotel and pub segments by incorporating a 50% drop in the top line from 2019. We noted the resilient performance of the other segments. With 15% lower earnings for 2020, we lower our fair value estimate to HKD 69 from HKD 74, and maintain the company's narrow economic moat rating. We believe the shares are trading at an attractive valuation given the resilience of most recurrent income, room for large acquisitions, and scope for other capital management initiatives. In addition, we stress sharp recovery in 2021 is likely for hotel and pub operations.