Initiating Coverage on Narrow-Moat HK Electric Investments with HKD 5 and 1-Star Rating
We are initiating coverage on narrow moat-rated HK Electric Investments, or HKEI, with a fair value of HKD 5 and a 1-star recommendation. Our fair value of HKD 5 represents a fair distribution yield of 7.5% and enterprise value/EBITDA of 10.6 times. We apply weighted average cost of capital of 5.6%, which is at the low end of peers within our global utilities coverage.Our 1-star recommendation is based purely on valuation grounds as we view the vertically integrated electricity operator's asset...
HK Electric Investments is an investment trust based in Hong Kong. Co. maintains an investment focus on the power industry. Co.'s operations comprise the generation, transmission, distribution and supply of electricity to Hong Kong Island and Lamma Island. Co. conducts is operations through its principal operating subsidiary, The Hongkong Electric Company (HEC). HEC's power generation facility is the Lamma Power Station which has an aggregate installed capacity of 3,737 megawatt (MW). Co. provides electricity to 575,000 registered customers on Hong Kong Island and Lamma Island.
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