Bank of America Securities: Initiates coverage of HK & CHINA GAS (00003) with an "underperform" rating. Improved earnings prospects still unable to cover dividend payments.

Bank of America Securities released a research report stating that it is initiating coverage on HK & CHINA GAS (00003) with an "underperform" rating and a target price of 6.5 Hong Kong dollars. Despite an improvement in the group's profit prospects this year due to lower gas costs, the research firm believes that its free cash flow is still insufficient to cover dividends, and the dividend payout can only be maintained at a stable level in the coming years. Bank of America Securities also pointed out that the group's restructuring measures may not provide significant help in the short term. Given the challenging market environment and weaker dividend prospects compared to peers, the company's dividend yield of approximately 4.9% is similar to other Hong Kong utility companies and is not attractive to the bank. Bank of America Securities forecasts that the group's net profit for 2025 to 2027 will be 4% lower than market expectations, with free cash flow ranging from 3.5 billion to 4.7 billion Hong Kong dollars during the forecast period, which is still insufficient to cover the 6.5 billion Hong Kong dollar dividend payment. The research firm also believes that the possibility of the company increasing its dividend per share is unlikely, which will limit the potential for the stock price to outperform the market.