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Morningstar | Shifting Some Focus Back to Hong Kong After Diversification

CK Asset Holdings, or CK Asset, has a balanced profile with even exposure to the volatile residential trading business as well as more stable earnings from investment properties and REITs. However, given its recent foray into aircraft leasing, energy, and infrastructure businesses, CK Asset is no longer a pure real estate play, as reflected by the recent name change.On the residential side, CK Asset's scale and dominance give it a formidable competitive advantage in a highly consolidated Hong Kong property market. The company has a cost advantage in sourcing land supplies in Hong Kong. First, the company's long operating history has made it a major owner of industrial and agriculture assets suitable for residential and commercial conversion. Second, the city has a unique land market, with the government as the sole seller of new undeveloped land. The government land release market is particularly opaque, with a cohort of major developers exercising significant power in dictating the supplies coming to market. The combination of major players owning significant land and an opaque government land release program is a significant deterrent to new entrants. While the Hong Kong residential property market is at a cyclical high, CK Asset can leverage its competitive advantage to successfully navigate any difficulties ahead.CK Asset's investment properties, while still substantial, are smaller and more fragmented relative to other large developers and landlords in Hong Kong. The CBD office portfolio consists of a single high-quality asset, while others may be redeveloped or disposed. The company's hotel portfolio is differentiated with a focus on midrange hotels and service apartments outside core urban districts. Now, with all investment properties consolidated under one company, it is gradually streamlining the portfolio through asset sales.CK Asset executed a stratgic transition over the past two years by acquiring several yield-oriented businesses across the world, funded by asset disposals in Hong Kong. More recently, the company shifted some focus back to Hong Kong property by engaging in limited landbanking and redevelpment projects.