EUR 850.00 For Business Accounts Only

Morningstar | Outlook for Gas Utilities Remains Promising; ENN Energy Our Preferred Pick

We are increasing our fair value estimates for China Resources Gas, or CRG, and ENN Energy, or ENN, to HKD 38.00 (from HKD 36.50) and HKD 88.00 (from HKD 83.00) respectively, after taking into account the time value of money and our updated foreign exchange rates assumption. Meanwhile, our fair value estimate for China Gas Holdings, or CGH, remains unchanged at HKD 29.00. Our narrow moat and stable trend ratings for CGH, CRG, and ENN are intact. In our view, CRG and ENN are undervalued while CGH is fairly valued. Our preferred pick is ENN given the company’s ability to source LNG at competitive prices and its potential in the fast-growing integrated energy business.

While there are concerns that China’s slowing economic growth may weaken demand for natural gas, latest data revealed by the National Development and Reform Commission showed that apparent consumption of natural gas remained strong and grew 18.1% year over year in 2018 to 280.3 billion cubic meters. We think China's goals to address environmental concerns are powerful drivers for long-term gas demand and we expect city gas operators will continue to benefit from this. We will provide an update on CRG and ENN, pending the release of their final results in end March.