CK Asset Executing On Its Diversification Strategy And Getting Little Credit For It

I wasn’t bullish on CK Asset Holdings (OTCPK:CHKGF) (1113.HK) back in July, largely because I didn’t see a big enough discount to fair value to compensate for the risk of the company’s ongoing strategic shift toward owning/operating more recurring-revenue assets in lieu of property development. CK Asset’s management team was pretty good at property development, but the track record in these new ventures is much shorter and some of the initial investment decisions have been more than a little curious to me.

The shares have since lagged the Hang Seng Index, falling about 7%, but outperforming other property developers like Sun Hung Kai Properties (OTCPK:SUHJY), Swire (OTCPK:SWPFF), and Henderson Land (OTCPK:HLDCY). I certainly didn’t have the Hong Kong protests in mind when I passed on buying these shares, and I’m not about to take credit for being right when such a significant exogenous factor came into the market.

As things stand now, though, I’m more bullish on this company and the shares. The acquisition of Greene King made sense to me, and I think I have a better sense of what management is looking to do in the future with its non-property development operations. There’s still quite a bit of uncertainty here between macro/political factors and CK Asset’s ongoing leverage to property development, but at a 25%-plus discount to my estimate of fair value and a healthy dividend, I like the risk/reward a lot more.

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CK Asset Executing On Its Diversification Strategy And Getting Little Credit For It