Cheung Kong Infrastructure Holdings (CKI), the infrastructure firm controlled by Hong Kong tycoon Li Ka-shing, aims to make further international acquisitions after reporting results that beat market expectations.
The Hong Kong-listed firm's post-tax profit for 2012 rose 22 per cent to HK$10.08 billion, beating a Bloomberg consensus estimate of HK$9.39 billion. Net profit also rose 22 per cent to HK$9.43 billion, but that was below forecasts of HK$9.75 billion from JPMorgan; HK$9.5 billion from Nomura; and HK$9.77 billion from Citi.
Turnover for the year-ended December 31 grew 17.5 per cent to HK$4.11 billion, above the Bloomberg consensus estimate of HK$3.8 billion.
The two main drivers of the company's profit growth were UK Power Networks (which supplies London's electricity) and Northumbrian Water, British businesses which CKI acquired in 2010 and 2011 respectively, said Victor Li Tzar-kuoi, CKI chairman and the eldest son of Li Ka-shing.
The profit contribution from Britain soared 47 per cent to HK$5.49 billion, of which UK Power Networks, CKI's largest overseas investment, contributed HK$3.53 billion, for a year-on-year increase of 24 per cent.
"Sterling depreciation is a rising risk for 2013 earnings [of CKI]," said a Nomura report.
"We expect CKI to report strong 2012 earnings, mainly driven by the first full-year earnings contribution from Northumbrian Water and a first time contribution from Wales & West Utilities [a British gas company acquired in October 2012]," said a JPMorgan report dated January 31.
As of the end of last year, CKI had cash of HK$6.98 billion and its net debt to capital ratio remained low at five per cent, said Victor Li. "The company is well-positioned to make more acquisition opportunities," he said.
The firm will continue its three-pronged strategy of acquiring new firms, maintaining a solid balance sheet, and growing businesses organically, added Li.
CKI should have the financial resources to fund up to HK$10 billion of future acquisitions, providing a potential 10 per cent upside to future earnings per share, said JPMorgan. "Potential merger and acquisition opportunities include privatisation of Australian power grids and EU [European Union] utilities," it said.
CKI is one of the potential buyers of the Moomba to Adelaide gas pipeline of APA Group, an Australian gas company, according to Australian media reports.
The profit contribution from CKI's businesses in Australia, New Zealand and Canada declined last year, while the profit contribution from mainland China grew 4 per cent to HK$395 million.
"CKI achieved significant growth in the past decade, with profit attributable to shareholders nearly tripling over the last ten years, and almost doubling over the last 5 years," said Victor Li. The group will pay a final dividend of HK$1.26 per share.
Its share price rose 1.8 per cent to close at HK$52.25 yesterday.