CK Hutchison's Italian Telco Operations Still Weighed by Competition; Our FVE Unchanged

CK Hutchison's, or CKH's, European and Hong Kong telco operations division is showing a collectively sluggish top line down 2% for the nine months year-to-end September over the year-ago period. Its quarterly management update by the telco group indicates that this is mainly driven by ongoing competition in Italy. We expect that this will be offset by a currency tailwind on the CKH level and leave our core assumptions unchanged for 2021. We do, however, tweak our 2022 top-line forecast lower for 3 Italia's challenges to linger and some currency headwind. Also, management guides that the sale of the British tower assets will probably be completed in early 2022. This leads us to shift one-off gains, which we estimate at HKD 14.5 billion associated with this sale to 2022 but we note that gains related to its merger of its Indonesian business with Ooredoo could add to 2021 profit. We estimate net profit to be HKD 43.9 billion and HKD 51.6 billion in 2021 and 2022, respectively, inclusive of one-off gains. All in, there is limited impact to our fair value estimate, which remains at HKD 80 for CKH. Share buybacks have so far totaled 0.5% of the capital base in 2021, which doesn't move the needle much so shares outperformance is still in need of a catalyst.