On Tuesday, UBS made adjustments to its financial outlook for CK Hutchison Holdings Limited (1:HK) (OTC: CKHUY), a global conglomerate headquartered in Hong Kong. The price target for the company's stock has been reduced to HK$43.00, down from the previous HK$45.30, while the firm retained a Neutral rating on the shares. According to InvestingPro analysis, the stock appears undervalued, currently trading at an attractive P/E ratio of 7.14x and maintaining impressive gross profit margins of over 60%.
The adjustment follows a comprehensive review of the company's listed subsidiaries and associates' quarterly earnings, alongside discussions with CK Hutchison's management. UBS analyst from the firm noted a decrease in the earnings forecast for the years 2024 to 2026, ranging between 24% to 28%. Despite this revision, the new earnings estimates for the same period are reported to align closely with the prevailing market consensus.
The analyst highlighted that the revised earnings projections suggest a dividend yield of 5.8% for the year 2024, assuming a 40% payout ratio. This is comparable to the 41% payout ratio in 2023. Additionally, the analyst anticipates a compound annual growth rate (CAGR) of 9.6% in earnings for CK Hutchison from 2024 to 2026. Notably, InvestingPro data reveals the company has maintained dividend payments for 33 consecutive years, demonstrating strong commitment to shareholder returns.
The decision to maintain a Neutral rating on CK Hutchison reflects the analyst's view on the current uncertainties surrounding the company's shareholder return policy, which includes considerations for buybacks and dividend distribution. Nevertheless, the analyst acknowledges the company's defensive and diversified earnings stream. Moreover, the firm notes that CK Hutchison's market valuation remains below that of its listed subsidiaries, a trend that has persisted over time. InvestingPro subscribers can access 8 additional key insights about CKHUY's valuation and financial health metrics, helping investors make more informed decisions about this established industrial conglomerate.
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