Power Assets: Limited Impact From Hong Kong Electric's Disappointing Development Plan

We keep our fair value estimate for Power Assets Holdings, or PAH, at HKD 48 following slight tweaks to our profit forecast to reflect a somewhat disappointing 2024-28 development plan and to incorporate new foreign exchange projections. Separately, a restructure at UK Rails that involves the issuance of new shares to PAH is a noncash transaction. Both events have a limited impact on our cash flow projections for the company. PAH is slightly undervalued presently, with a dividend yield of 6.7% at the current share price. Our dividend estimate is unchanged at HKD 2.82 per share. While we think PAH's share price should find support at the current level, we see limited earnings growth in the absence of acquisitions and the lack of growth in its dividends leaves us with a preference for its parent, CKI Holdings.