Power Assets' 1H Profit Dampened by FX Headwinds, Hedging Loss, but FVE Unchanged

We lower our 2022 earnings estimates for Power Assets Holdings, or PAH, by 6.6% given continued currency headwinds and an inflation hedging loss at 36% owned Wales & West Utilities, or WWU, but there is negligible impact to our fair value estimate, which remains at HKD 53. Interim net profit was up 14%, which largely reflects the absence of the one-off charge for deferred taxes that hurt year-ago contribution from UK Power Networks, or UKPN. In total, PAH's first half performance was within our expectation. PAH is trading at a slight discount to our fair value estimate and we see support from a stable dividend of HKD 2.52 that is yielding 5.6% at the current HKD 50.65 share price level. We continue to prefer parent CKI Holdings, due to potentially larger upside.