Cheung Kong Infrastructure: technology projects add zest

Dec 6, 2000

Cheung Kong Infrastructure has had a busy year with numerous new investments and joint ventures.

Year 2000 will be remembered as a bumper period for Cheung Kong Infrastructure [1038] StockHouse Logo in terms of new investments and new joint ventures. Of these, the most interesting and most likely to act as a future growth impetus for the company are the technology-related joint ventures with Israel-based On Track Innovations (OTI) and Canada-based Stuart Energy [T.HHO]. OTI is involved in contactless smart card technology while Stuart Energy has a patent to produce hydrogen fuel that is deemed a much better alternative to petroleum and fossil fuels.

Stockhouse CKI “It has always been our practice to try to integrate high technology into our core businesses,” said Ivan Chan, senior manager of Planning & Investment for Cheung Kong Infrastructure, in an exclusive interview with StockHouse. Chan said the company presently did not have any plans to establish a separate business division for technology-related investments, but is nevertheless always on the lookout for new opportunities in this area. He admitted that the two new joint ventures currently pale in size compared with the company’s steady-return core businesses but that their high-growth prospects should not be overlooked.

“We have been involved with high technology for a long time now. In fact, we were one of the earliest customers of OTI. Our employee ID cards and the intelligent resident cards used for Cheung Kong Holdings’ [1] Laguna Verde residential development are all OTI products,” added Chan.

When asked whether e-Smart System, the 50:50 joint venture company comprising OTI and Cheung Kong Infrastructure, would be interested in bidding for the 6.8 million Hong Kong smart ID card project, likely to be put out for tender by the SAR Government, Chan replied in the affirmative but added that details regarding the tender had yet to be finalized.

Smart card market boom

The Asian smart card market is forecast to reach some HK$195 billion ($25 billion) by the year 2005. German-listed OTI is the world’s pioneer in microprocessor-based contactless smart card technology and its “EYECON” system is a patented technology.

“It is a contactless smart card with a CPU that has a good memory size and operates on what is called Application-Specific Integrated Circuit,” explained Chan.

Product development opportunities seem limitless with regards to the everyday needs of Asian consumers and corporations in areas such as mass transportation, toll roads, parking, identification, access security, web security and e-payment. Cheung Kong Infrastructure’s partnership with OTI is likely to open up a whole new and exciting business path.

e-Smart System has recently teamed up with Korea’s largest total security provider, S1 Corporation, to deliver a wide range of solutions based on OTI’s technology to the Korean smart card market. S1 Corporation is a market leader in Korea with a market share of over 50%.

In addition to its 13% stake in Stuart Energy, following its IPO in October this year, Cheung Kong Infrastructure is also a 40% partner in joint venture company Stuart CKI Corporation. The latter awarded to Cheung Kong Infrastructure exclusive distribution rights to Stuart Energy’s hydrogen technology and products in South East Asia and Australia for a 12-year period.

“Hydrogen fuel is most suitable for use as a zero-emission transportation fuel and as a regenerative electric power which can be used as back-up power supply in places that require an extremely stable supply of power. An example would be a hospital,” Chan said.

Clean and cost-efficient fuel is undoubtedly most welcome in an environment-conscious world today, particularly in Asia where air pollution is worsening by the day. As Asian cities become more intolerant of poor air quality, demand for hydrogen fuel will likely see strong growth over the foreseeable future.

Chan believes that good business prospect lies in the development of hydrogen fuel system units for individual household use.

At Monday’s closing price of HK$11.90, the company’s stock was trading at 7.9 times FY2000 EPS of HK$1.50 based on consensus estimates.