New | Port assets losing allure for Li Ka-shing’s Hutchison Whampoa

At one time, the port assets of Hutchison Whampoa were the crown jewels in the business empire of billionaire Li Ka-shing. Today, those assets seem to be losing their lustre.

Ports and related services contributed almost half earnings before interest and tax (Ebit) for Hutchison Whampoa a decade ago, which was then in the middle of a frantic and uncertain foray into the telecoms business.

The South China Morning Post has reported Li is mulling the possible sale of a 40 per cent stake of Hutchison Port Holdings (HPH) to a quartet of state-owned mainland China companies. If it goes through, the move would underscore Hutchison’s recent tactic of monetising port assets to free up capital to support other high-growing businesses.

“Ports are still a good business and a cash generator for Hutchison. It’s just that the golden days of the port business are behind us,” said CLSA analyst Daniel Schutte.

With that gradual decline in mind, Hutchison sold a 20 percent stake in HPH to PSA International, the Singaporean state-backed port operator, in 2006. Hutchison netted HK$24.38 billion from the deal to feed the 3G business, which was then haemorrhaging tens of billions of dollars.

In March 2011, Hutchison further diluted its port interest in 2011 through the US$5.45billion public offering of Hutchison Port Holding Trust (HPHT), which holds the Pearl River Delta container terminal assets that accounted for 30 per cent revenue and half of earnings before interest, tax, depreciation and amortisation (Ebidta) for HPH.

“When Li floated HPHT in 2011, many of us thought it was a sign that he no longer was optimistic in the prospects of the port business,” said a former HPH employee.