Fitch Ratings has affirmed Hong Kong-based CK Hutchison Holdings Limited's (CKHH) Long-Term Issuer Default Rating at 'A-'.

The Outlook is Stable.

The company's ratings reflect its strong business profile, geographical diversification, stable cash flow generation from its high-quality port, retail, infrastructure and telecommunication businesses, and management's strong record of prudent financial management.

The Stable Outlook reflects our view that its financial profile will continue to be robust, despite sluggish earnings in 2023 due to a challenging operating environment, especially in its telecom and port divisions.

Key Rating Drivers

Operating Environment Remains Challenging: Fitch expects CKHH's operations to remain sluggish in 2023 due to deterioration in the European telecom division, reduced dividends in the infrastructure segment and headwinds in the port business.

We expect port earnings to be affected by throughput decline and reduction in storage income, which had increased in 2022 due to supply chain disruptions. However, the earnings deterioration should be partially offset by robust earnings in the retail division and higher investment income. We expect a modest recovery in its major segments in 2024, especially in the telecom division.

CKHT Earnings Recovery from 2024: Fitch expects the contribution from its European telecom entity, CK Hutchison Group Telecom Holdings Limited (CKHT, A-/Stable), to continue to decline in 2023, despite a modest improvement in 2H23, before a gradual recovery from 2024 as it has been raising tariffs to mitigate the impact of higher costs and tower asset sales cease to have an effect on earnings comparison. The earnings decline in 1H23 was largely due to higher costs under an inflationary environment and the sale of UK tower assets that was completed in late 2022.

Stable Infrastructure Cash Flow: Fitch expects infrastructure cash flow to be slightly lower, reflecting the more stringent regulatory resets that came into effect over the past few years for CK Infrastructure Holdings Limited (CKI, A-/Stable), CKHH's main entity in the infrastructure division, especially in the UK and Australia. However, we believe cash flow visibility over the next few years has improved with the current round of resets mostly completed. Furthermore, its regulated utilities' asset bases and revenue may benefit from high inflation in the UK and Australia.

Asset-Light Strategy: The company is pursuing an asset-light strategy in the telecom division. In April 2023, it announced the spin-off of Italian network assets and sale of a majority stake in the new entity holding the assets to a private equity firm. It also announced in June the merger of its UK telecom operation with Vodafone Group Plc (BBB/Positive), with CKHT to hold 49% of the merged entity. The two transactions are subject to regulatory approvals.

We believe both transactions, if completed, will have a limited impact on the company's credit profile as we expect a slight improvement in financial metrics with one-off proceeds and reduced capex offsetting the drop in revenue and earnings contribution.

Robust Financial Profile: CKHH's balance sheet has improved in recent years, supported by tower asset sale proceeds. Its EBITDAR net leverage improved to 3.4x in 2022 from 3.5x in 2021 as it reduced debt with the asset sale proceeds and lower capex in the telecom division. We expect EBITDAR net leverage to rise slightly in 2023 due to lower earnings but improve gradually over the next two-to-three years with the modest earnings recovery. We expect capex to rise in 2023 with capacity expansion in ports and increased store openings in the retail division before moderating in 2024-2025.

Structural Subordination Risk Mitigated: CKHH's port, infrastructure and telecom businesses are capital intensive and raise leverage, which constrains the ratings. There is also some structural subordination of cash flow, especially in utility and infrastructure assets, as there is debt at the asset-owning level and the operating cash flow of these businesses can only be accessed via dividends. However, cash from businesses other than infrastructure or CKHT and dividend inflow can cover the parent's interest burden, mitigating the structural subordination risk.

Derivation Summary

CKHH's ratings are supported by its business diversification by geography and segment, which provides stable cash flows and underpins its strong business profile. A solid record of conservative and prudent financial management and a coherent strategy also support the business profile.

Few peers have similar business models, as CKHH is a conglomerate with infrastructure, port, retail and telecom segments. It is somewhat comparable with CLP Holdings Limited (CLPH, A/Stable), although CLPH has a stronger business profile, underpinned by stable returns from regulated assets, and a historically more robust financial profile. CLPH's regulated assets are mainly held in its key Hong Kong business, CLP Power Hong Kong Limited (A/Stable).

Key Assumptions

Fitch's Key Assumptions Within Our Rating Case for the Issuer:

Fitch-adjusted revenue to rise by 1%-3% in 2023-2024

Fitch adjusted EBITDA margin of 22%-23% in 2023-2024

Dividend payout ratio of 30%

Capex of HKD28 billion per year in 2023-2024

No major acquisitions or disposal in 2023-2024. We have not reflected the sale of the network asset company or the merger of the UK telecom operations with Vodafone in our rating case as both transactions are pending regulatory approval.


Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

Provided CKHH's business profile remains unchanged:

EBITDAR net leverage of 3.1x or less on a sustained basis; and

Positive free cash flow (FCF) after acquisitions and dividends for a sustained period.

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

EBITDAR net leverage exceeding 4.1x for a sustained period;

Substantially negative FCF after acquisitions and disposals;

Significant changes in the business mix and capital structure management that are adverse to its credit risk profile;

Weakening quality or decreased quantity of recurring cash.

Liquidity and Debt Structure

Strong Liquidity, Access to Funding: CKHH's ratings are supported by its robust liquidity profile and easy access to capital. Reported cash and cash equivalents were HKD129 billion at end-June 2023 (end-2022: HKD138 billion), compared with short-term reported debt of HKD43 billion. Debt maturities are also well-laddered. The company has strong access to capital markets and good banking relationships.

Issuer Profile

CKHH is a Hong Kong-listed diversified conglomerate. Its main businesses include telecommunications, mostly mobile operations in Europe, Hong Kong and south-east Asia, as well as infrastructure, retail, and ports.

Summary of Financial Adjustments

Fitch has made adjustments related to lease liabilities as per our Corporate Rating Criteria. Depreciation, amortisation and interest expense are reclassified as operating costs in the income and cash flow statements. Fitch has adjusted the debt by adding 8x annual operating lease expense in the retail segment.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit

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