5 key takeaways from Cheung Kong's profit results

Balance sheet's gearing at 8%.

According to Nomura, the key themes for today’s results announcements are very similar to those at the interim: (1) CK’s development and rental operations continued to beat expectations, and (2) its balance sheet remains very strong with gearing at only 8.0%.

Here's more from Nomura:

Development – Of CK’s HKD10bn of development profit in 2012, HK accounted for 53% while China made up 47%. Key profit contribution came from Festival City in HK and the Greenwich in Beijing.

Compared to our forecasts, the HKD2bn beat is split 75/25 to China/HK. Looking ahead, CK will continue to follow its asset turnover strategy. Projects will be put up for sale once consent to presale is received and it continues to aim for 80%+ sell-through upon completion.

Projects up for sale next should include Kwok Shui Rd and Lohas Park Ph 3.

Rentals – Including contributions from associates, CK’s net rental rose 16% y-y. Considering the absence of contributions from disposed assets, this 16% y-y is good with overall net rentals of HKD1,978mn 10% ahead of our forecasts.

Hotels – Contributions from hotels and service apartments rose 4% y-y to HKD1,235mn. Excluding disposed hotels, CK’s hotels and service apartment would have risen 20% y-y on a like-on-like basis.

Net debt and gearing – In 2H 2012, CK’s net debt increased from HKD21.2bn as at June 2012 to HKD26.9bn as at December 2012.

Against shareholders’ funds of HKD335bn, CK’s net-debt-to equity was still a very healthy 8.0 (vs. 6.7% back in June 2012).

Valuation - BVPS rose 5.8% h-h from HKD136.55 as at June 2012 to HKD144.50 as at December 2012. Against today’s closing price of HKD113.20, CK’s current 0.78x P/B is 37% below its long-term average of 1.24x.