Lyon: CKH HOLDINGS (00001) rating raised to "highly confident outperform the market" with target price raised to HKD 102

Lyon released a research report stating that it has raised the target price of CKH HOLDINGS (00001) to 102 Hong Kong dollars, upgraded its rating from "outperform" to "high-conviction outperform", and listed it as one of the top two preferred stocks in the Hong Kong conglomerate sector. Lyon stated that CKH HOLDINGS has been continuously progressing with asset realization since 2020, accumulating a large amount of cash inflow. With various asset disposal plans taking shape, especially the potential sales of global port assets and non-UK telecommunications businesses, the company's already strong balance sheet will be significantly strengthened. The bank expects that with only the sale of UK railways, UK Power Networks (UKPN), and Vodafone Three by 2026, CKH HOLDINGS' leverage ratio will drop significantly from 17.1% in 2025 to 3.7% in the forecast year of 2026; and once the sale of port assets is completed, the company will directly return to a net cash position. The bank pointed out that despite CKH HOLDINGS' stock price rebounding by 74% since the beginning of 2025, the current stock price is still discounted by 51% compared to the forecasted net asset value per share of 146 Hong Kong dollars in 2026, making it attractively valued. In the current geopolitical context, CKH HOLDINGS' overseas investments have essentially narrowed, allowing the group to have ample room to distribute special dividends to shareholders after completing asset sales. Historical records show that CKH HOLDINGS has distributed special dividends three times in the past 12 years. If the group chooses to retain cash, its undervaluation and strong cash reserves also make it a potential privatization target similar to He & Me Group. Lyon currently forecasts that the recurring profits of CKH HOLDINGS from 2026 to 2028 will be 21% to 33% higher than the 2025 level, with Cenovus Energy becoming the core profit driver in 2026, enough to offset the impact of divesting UK railways and UK Power Networks. The bank has adjusted its target discount rate from the historical average of 25% to 34% and rolled forward the valuation.