China Gas Holdings Earnings: Disappointing Results; Recovery Expected With Attractive Dividend Yield

China Gas Holdings’, or CGH’s, fiscal 2024 (ending March) results were disappointing, falling 26% year on year. Stripping out other losses (mainly impairment losses of HKD 686 million on trade receivables and contract assets), core earnings were still 4% lower. We cut our fiscal 2025-27 earnings estimates by 13%-17% to reflect lower gas and connections income, slower value-added services, or VAS, earnings growth, and a weaker Chinese yuan. Consequently, our fair value estimate is reduced to HKD 11.50 per share from HKD 12.50. Although CGH’s valuation is undemanding, our preferred pick in the sector is ENN Energy as we think investors will need time to regain confidence on CGH given its consistent underperformance in earnings.