Long/short equity, medium-term horizon, value, growth

Cheung Kong Holdings: A Classic Conglomerate Valuation Dilemma

Cheung Kong Holdings (OTCPK:CHEUY) (0001.HK), headquartered in Hong Kong, is a conglomerate controlled by Asia's richest man, Li Ka Shing. It is a major property developer in Hong Kong and China, and has interests in hotels, infrastructure and investments & finance. Cheung Kong Holdings also owns a 49.9% stake in Hutchison Whampoa (OTCPK:HUWHY) (0013.HK), a global conglomerate in itself, with business interests in ports, telecommunications, property and hotels, retail, energy and infrastructure.

The market value of the 49.9% stake in Hutchison Whampoa represents more than 75% of the market value of Cheung Kong, and with a sum-of-the-parts valuation, we will find that Cheung Kong's non-Hutchison assets are deeply undervalued.

Using a sum-of-the-parts valuation

Given that Cheung...

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