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2026-08-13 13:28:14 Citi published a research report saying that CKI HOLDINGS (01038.HK)'s strong profit performance in 1H was supported by disposal gains, but management adopted a more conservative stance than market expectations regarding special dividend distribution during the results briefing, prompting the broker to lower its TP. The report noted that CKI HOLDINGS (01038.HK)'s net profit in 1H surged 389% YoY to HKD21.252 billion, including total disposal gains of about HKD15.271 billion from the sales of assets such as UKPN and UK Rails. Excluding these items and the core earnings contribution from UKPN, core earnings from existing assets rose 15% YoY to HKD3.291 billion, mainly benefiting from higher returns on regulated utility assets in the UK and Australia, as well as increased interest income generated from disposal proceeds. Citi said CKI HOLDINGS (01038.HK) held net cash of about HKD33.9 billion as of the end of 1H, equivalent to HKD13.45 per share. Management stated during the results briefing that it preferred using cash for mergers and acquisitions rather than distributing special dividends, due to concerns that special dividend payouts would significantly reduce the company's equity base. Referring to sister company POWER ASSETS (00006.HK), which only began paying special dividends in 2017-2018 after the spin-off of HKELECTRIC-SS (02638.HK) in 2015, Citi expected CKI HOLDINGS (01038.HK) may need two to three years to identify M&A opportunities, with special dividends potentially not materializing until as early as 2028-2029. On acquisitions, CKI HOLDINGS (01038.HK) was reportedly a leading bidder last year for UK's Thames Water, but the company has recently leaned toward debt restructuring with existing creditors. Citi believed the likelihood of a near-term deal is low. In addition, CKI HOLDINGS (01038.HK) is reportedly considering selling EDL Energy for AUD2 billion to AUD3 billion. If completed, the broker estimated disposal gains of about AUD500 million to AUD1 billion could be recorded. Taking into account factors such as return resets and FX adjustments, Citi revised CKI HOLDINGS (01038.HK)'s earnings forecasts for 2026-2028 by 4% to 8%. Due to weaker special dividend catalysts, the broker also raised the weighted average cost of capital and cut the TP by 5% from HKD73.5 to HKD70, while maintaining its Buy rating and remaining optimistic about upside potential from possible M&A deals. (ad/da)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |