CK Hutchison (HKSE:00001, Financial) (-13%, -0.63%), a conglomerate of telecommunications, health & beauty, infrastructure and global ports, was a detractor. The stock was impacted by market fear in reaction to various events in China in the last six months, sending Chinese and Hong Kong markets tumbling. CK Hutchison’s reported results in the first half demonstrated an overall steady recovery from the pandemic last year and the fact that this is not really a “100% China” company. The retail division achieved +35% EBITDA growth. All regions have shown a good rebound year over year, but the segment hasn’t recovered back to the pre-COVID level yet. The telecom division’s muted results were driven by intensified competition in Italy as well as the decline of wholesale revenue from Iliad Italia. The merger between Husky Energy and Cenovus was completed in January 2021, and this combined company is now benefitting from commodity price strength. In September, CK Hutchison reached an agreement for another value accretive transaction. Merging the Indonesia telecom business with Indosat elevates the company’s local business from a sub-scale player to now the second-largest player in the market with better competitive advantages. The massively value accretive tower sale to Cellnex, first announced in November 2020, is progressing. CK Hutchison has completed five out of the six tower asset disposals and received aggregate proceeds of €6.3 billion so far, nearly 30% of CK Hutchison’s market cap. We are encouraged that the board has been deploying a portion of the proceeds for share buyback to take advantage of the current mispricing opportunity, but we think they could do even more.
From Mason Hawkins (Trades, Portfolio)' Longleaf Partners Fund third-quarter 2021 commentary.
