COMMERCIAL PROPERTY | Staff Reporter, Hong Kong

Cheung Kong mulls over other investment deals apart from Duet Group buyout

Fitch says it is in a near net cash position.

Fitch Ratings says that Cheung Kong Property Holdings Limited's  participation in a joint venture planning to acquire the Duet Group in Australia is consistent with management's plans to explore investment opportunities outside Hong Kong and diversify its sources of recurring income. 

Duet Group primarily owns and operates gas and electricity distribution assets and gas transmission assets in Australia, as well as a 900 megawatt (MW) portfolio of low-CO2-emitting generation assets in Australia, the US and Europe.

Here's more from Fitch Ratings:

CKP has partnered Cheung Kong Infrastructure Holdings Limited (CKI, A-/Stable) and Power Assets Holdings (PAH, 38.9%-owned by CKI) to acquire 100% of Duet Group for up to AUD7.5b (HKD43.1b), inclusive of transaction costs. CKP will take a stake of around 40% in Duet Group, CKI around 40% and PAH 20%, subject to independent shareholder approvals

CKP's share of the acquisition would be around AUD3b, which we believe CKP would fund with its available cash on hand. The company has ample liquidity with HKD50.3b cash on hand at end-June 2016, more than sufficient for the total net cash payable of HKD17b for this acquisition and the HKD6.3b for the purchase of an aircraft leasing business announced in December 2016.

CKP says it is in a near net cash position and is considering other investment opportunities to generate stable income in the long term. Fitch estimates that CKP's credit metrics will not be affected by any investment unless the total value of new investments exceeds HKD30b and assuming the new investments generate stable operating cash flows.

Fitch expects CKP's leverage, as measured by net debt/investment property value, to remain under 20% should the Duet Group acquisition complete as expected, assuming proportional consolidation of the group's net debt.


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