Merger of Li Ka-shing's CKI, Power Assets could enhance market value, analysts say
Power Assets-CKI union could improve cash utilisation and increase value of overseas assets
Li Ka-shing's international energy utility investment unit Power Assets Holdings would be better off merging with parent Cheung Kong Infrastructure (CKI) to enable its idle cash to be better utilised, say analysts.
It would help Power Assets' HK$68 billion cash pile, boosted by the sale and separate listing of its power unit Hongkong Electric last year, to be used to invest in a wider array of industries.
Power Assets focuses only on power and gas while CKI also invests in businesses with stable returns like water, waste collection, toll roads, car parks and rolling stock leasing.
"In our view, a merger of CKI and Power Assets is likely, and would mark the beginning of ... [phase] three in the development of Cheung Kong Group ... a phase of asset realisation following completion of the business-building phase in 1990-2010," said Daiwa Capital Markets' analysts in a research report.
They said they considered 1971 to 1992 to be the phase one period when the group grew to become Hong Kong's largest conglomerate. That was followed by more than two decades of international expansion in what they termed phase two, which lasted up to last year.
A reorganisation of Cheung Kong Holdings and Hutchison Whampoa was completed in June, under which the former - since renamed CK Hutchison Holdings - holds the group's non-property assets and the two firms' property assets were spun off into a new vehicle called Cheung Kong Property Holdings.