Industrials

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Time for some extra cash for investors, Superman.

People the world over like to build up their nest eggs as they age. Li Ka-shing, the 88-year-old Hong Kong billionaire who earned that superhero moniker for his canny investing, is no different.

Thanks to strategies every retiree will appreciate -- from buying income-producing investments like utilities to adopting a geographically diversified portfolio --  Li is sitting on a money pile that would make other companies salivate. Cash levels at his flagship CK Hutchison Holdings Ltd. ports-to-telecom conglomerate have never looked so good.

Have Cash, Will Travel
CK Hutchison has built up a hefty cash balance over the last couple of years, despite acquisitions
Source: Bloomberg

But investors aren't feeling the love.

A 5 percent rise in CK Hutchison's first-half dividend may have seemed generous against a just under 2 percent profit gain, but it belies Li's riches. Barring some payouts as CK Hutchison underwent a restructuring last year, over the last five years, dividend growth is negative 2.8 percent, according to data compiled by Bloomberg.

While its blended forward 12-month dividend yield of 3.5 percent may be higher than fellow conglomerate Fosun International Ltd.'s 1.9 percent or fellow hong Jardine Matheson Holdings Ltd.'s 2.7 percent, CK Hutchison is really more of a European play, considering around half its earnings come from that continent. Against Germany's Siemens AG, which has a dividend yield of 3.3 percent, it doesn't look so hot.

To be sure, some sort of cash cushion is essential to guard against unforeseen events. One -- June's Brexit vote -- was particularly damaging, roiling the pound and hurting dollar earnings in Britain, CK Hutchison's largest single market. Cash also comes in handy when still-low oil prices and stagnant global trade flows are weighing on the group's energy and port assets.

Plus, it's hard to maintain a buying spree without ready money. Li earned his Superman title for his deals, including pocketing billions after selling Orange Plc's mobile-phone unit to Germany's Mannesmann AG in 1999, and offloading an Indian telecoms business to Vodafone Group Plc. Nowadays, his astute moves rest on buying long-term guaranteed payouts courtesy of utilities in Europe and Australia.

Buying Frenzy
Li Ka-shing's companies have been on a deals spree
Source: Bloomberg
Note: 2015 figures strip out the $41.7 billion restructuring by Li of his CK Hutchison and CK Property empire .

Undeterred by Canberra's rejection of his bid for Ausgrid in August, Cheung Kong Infrastructure Holdings Ltd. made a A$7.3 billion ($5.3 billion) play for Australia's Duet Group earlier this month. Li has managed to wring higher yields from refinancing the utilities he's bought. Gas distributor Envestra Ltd. was paying out at a rate of about 5 percent when Cheung Kong Infrastructure purchased it a few years ago and now boasts a dividend yield of between 8 and 9 percent, according to HSBC Holdings Plc.

Li has also been busy trying to consolidate his European mobile network, and that requires money. In September, his Italian telecoms business received approval to buy out a rival, a potential turnaround in what is one of the group's least-profitable cell phone markets. Attempts to acquire British competitor O2, however, didn't get the regulatory green light.

Patient investors may want to sit back until asset spinoffs create a special dividend. The group's A. S. Watson & Co. chain was planning to list before Singapore's Temasek Holdings Pte took a stake, and investment bankers still hope an IPO may be in the wings. Even a share sale of CK's now booming European telecoms business could create a fee bonanza -- and a juicy shareholder windfall.

Brexit Bother
Since the June Brexit vote, Li Ka-shing's Hong Kong firms, most reasonably exposed to the U.K., have underperformed
Source: Bloomberg

But why wait? CK Hutchison and its units enjoy strong enough credit ratings, so access to funding for acquisitions isn't difficult.

Li is fast running out of excuses and investors, wary of the impact Brexit may have, are becoming disgruntled. Superman would be wise to make 2017 less about shopping and more about sharing.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net