CK Life Sciences made a decision that has reaped rewards for fifteen years

The concept of value investing always withstands the test of time, and CK Life Sciences has demonstrated exceptional insight and wisdom in this area. As a flagship entity of the CKH Holdings in Hong Kong, CK Life Sciences (HKSE: 0775) made a pivotal investment in an IPO project, Infinity Development (HKSE:604), in 2010. This strategic decision has enabled the company to nearly recover its initial IPO costs through dividends amassed over the past 15 years, with the current share price significantly exceeding the original offering price, thereby achieving a dual benefit of capital growth and income generation.

Infinity Development (HKEX: 0640) focuses on the manufacture and sale of adhesives, processing agents, hardeners, and vulcanized adhesives essential for footwear production, positioning itself as a key supplier to leading global shoe manufacturers. Recently, the company invested $4.25 million to acquire assets aimed at establishing new manufacturing facilities in Indonesia, thereby expanding its operational capabilities. Notably, numerous sneaker OEM firms listed in Hong Kong also have factories in Indonesia. This strategic move by Infinity Development appears to be aimed at securing additional orders, which will undoubtedly act as a catalyst for its business growth.

Historically, Infinity Development has demonstrated steady growth in both earnings per share and dividend payouts. Over the years, dividends have reached as high as HKD 0.55, which is nearing the initial IPO price of HKD 0.60. As a cornerstone investor, CK Life Sciences acquired 25 million shares of Infinity Development, maintaining its holdings to this day. From dividends alone, CK Life Sciences has realised nearly HKD 14 million. Another cornerstone investor, Raffles Partners Asset Management (Hong Kong) Limited, invested in 37.5 million shares.

The company’s sponsor, Sinopac Securities Asia, led by Bruce Tsang, successfully achieved an oversubscription of over 700 times, with approximately HKD 6.5 billion in funds frozen, thanks to the backing of prominent investors. Following its listing, Infinity Development’s stock performance has met market expectations, with a steady appreciation in share price.

As global footwear demand continues to rise, manufacturers are increasingly stringent regarding the quality of adhesives. In this competitive landscape, operators lacking competitiveness are likely to be phased out. Concurrently, the demand for environmentally friendly water-based adhesive products from footwear brands and manufacturers is expected to grow. Despite the recent downturn in the Hong Kong stock market, Infinity Development has chosen to expand its production capacity at this critical juncture, thereby positioning itself for future success. CK Life Sciences' foresight in making such a strategic investment 15 years ago exemplifies an acumen not commonly found among typical enterprises.