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　　机构：摩根士丹利

　　Excluding Infrastructure acquisitions, CKH FCFE yield in 2017 could have been 7.3%. We expect 2018/19 FCFF yield could rise to 9-10% with Husky dividend, lower interest expense due to refinancing, and higher EBITDA from infrastructure. Maintain OW.

　　2017 Review – CKH reported recurring net profit of HK$35.1bn . 2017 EPS grew 6%, to HK$9.10, driven by Italia mobile merger, CKI’s new acquisitions and HTHKH’s disposal gain. DPS growth of 6% and EBIT growth of 7% were also in line. On the positive side, 3G Europe saw 28% increase in EBITDA, due to Italy consolidation, and port EBIT grew by 9%. However, retail EBIT was flat in FY17, slightly missing our estimate, due to weaker H&B China business . Finance costs grew 36%YoY, to HK$18bn, on 9.5% YoY debt increase and also one-off refinancing cost, but should decline in 2018 on lower interest rate after debt consolidation. HAT's full-year EBIT fell 89%, due to rollout costs in Indonesia and Vietnam

　　FCF is key – FCFF of HK$11bn is much smaller than HK$36bn and HK$27bn in 2016/15, but if we exclude investment of HK$35bn in DUET/ISTA/RHC by CKI, FCFF could have been HK$46bn . For 2018, FCF yield can be higher than 9% if we assume annualized contribution from these acquired infra assets, PAH special dividend and Husky annualized new regular dividend . Potential special dividend from HTHKH and interest saving in Italy should improve FCFE yield further.

　　Valuation is attractive at 3% dividend yield, 28% discount to NAV and 9.4x P/E on our 2018 estimates, below its long-term average of 12.4x.

　　What's changed: We tweak our EPS estimates for 2018e/19e by +3.0%/2.7% to HK$10.54/HK$11.13 to reflect better than expected ports business result partially offset by higher interest expenses from debt consolidation.

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