A report from Morgan Stanley indicates that CKH HOLDINGS' (00001) sale of a 49% stake in its UK telecommunications business is part of a strategy to recycle and monetize assets, which is expected to help drive net asset value and narrow the discount. The firm maintains an "Overweight" rating and has increased its target price from HK$61 to HK$78, anticipating more similar disposal transactions in the future.
CKH HOLDINGS and Vodafone merged their telecommunications businesses in May 2025, subsequently selling a 49% interest in the joint venture for £4.3 billion (approximately HK$45 billion, equivalent to 7.7 times the forecast 2026 EV/EBITDA). The report states that CKH HOLDINGS' unlisted assets (including ports, telecommunications, and retail) are currently assigned zero value by the market, meaning any sale activity should have a positive impact on the share price. Following the completion of the sale, CKH HOLDINGS' net debt is projected to decrease from HK$113 billion to HK$68 billion.
Using a sum-of-the-parts valuation method, the firm narrowed the net asset value discount from 40% to 30% (one standard deviation above the ten-year average) and raised the target price-to-earnings ratio for the retail business from 12 times to 15 times, reflecting an improved outlook in Europe. The new target price of HK$78 corresponds to approximately 10.3 times the forecast 2026 P/E ratio. Morgan Stanley believes that CKH HOLDINGS' valuation is attractive, with a forecast 2026 P/E of just 11 times, a price-to-book ratio of 0.43 times, and a free cash flow yield of 8%. A stronger balance sheet could also imply potential share buybacks or special dividends.
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