Billionaire Li’s companies post biggest profits in 15 years

Li Ka-shing

Li Ka-shing’s two main companies reported their highest annual profits in 15 years after booking gains from the listing of an electric utility unit and rising home sales in Hong Kong.
At Cheung Kong Holdings Ltd., which operates the bulk of Li’s property business, net income climbed 53 percent last year to HKD53.9 billion (USD7 billion), the company said yesterday in a statement. Hutchison Whampoa Ltd., which operates industries ranging from telecommunications to infrastructure, reported profit more than doubled to HKD67.2 billion.
The results represent the final earnings before Li merges the two companies by late June as part of a $29 billion reorganization of a business empire spanning more than 50 countries. The 86-year-­old tycoon, known in Hong Kong as “Superman,” isn’t done making deals as Hutchison is in talks to buy British wireless carrier O2 for as much as 10.25 billion pounds ($16 billion) and is discussing adding phone assets in Italy.
“With this new structure, they are going to be more aggressive in pursuing assets in Europe, particularly in the telecom sector,” Jackson Wong, associate director at United Simsen Securities in Hong Kong, said ahead of the earnings release.
The reorganization, codenamed “Project Diamond” before being announced in January, comes as Li prepares to hand over the reins to his 50-year-old son Victor. The proposal would lump all of Li’s businesses into a new company called CK Hutchison Holdings Ltd. and then separate the real-estate assets into a new entity called Cheung Kong Property Holdings Ltd., which would be the second-largest landlord in Hong Kong. The proposal still needs approval from Hutchison shareholders.
Cheung Kong shares rose 0.7 percent to close at HK$153 in Hong Kong before the earnings report, while Hutchison dropped 0.1 percent to HK$105.50. The Hang Seng Index advanced 0.5 percent.
At Cheung Kong, which owns 52 percent of Hutchison, profit excluding property revaluations rose 46 percent to HK$48.9 billion as Hong Kong home prices rose 13 percent to a record last year despite government steps to cool the market.
After Li’s real-estate assets are spun off into CK Property, investment properties that generate lower returns could be sold off, according to JPMorgan Chase & Co. analysts Cusson Leung and Leo Ng.
At Hutchison, net income rose after the initial public offering of HK Electric Investments Ltd. in January of last year generated HK$16.1 billion in gains. Excluding special items such as the HK Electric spinoff and property revaluations, earnings rose 3 percent to HK$32 billion, compared with the HK$33.1 billion average of nine analyst estimates compiled by Bloomberg.
Profit rose amid higher contributions from the European phone business. Earnings before interest, taxes, depreciation and amortization at Hutchison’s 3 Group in Europe rose 23 percent to HK$15.6 billion. The company generates more than 40 percent of its revenue from Europe and is looking to increase that proportion.
The company announced last month it’s in exclusive talks to buy O2 from Telefonica SA. Separately, Hutchison is in discussions to buy Italian carrier Wind Telecomunicazioni SpA from VimpelCom Ltd., a person familiar with the matter said this month.
If completed, those deals would add to the 10 acquisitions Li’s companies have announced in the past year in areas ranging from Australian gas distribution to airplanes, according to data compiled by Bloomberg. Clement Tan and Michelle Yun, Bloomberg