Bank of America Merrill Lynch: Initiates coverage of POWER ASSETS (00006) with a "buy" rating and a target price of 63 Hong Kong dollars, expecting an increase in mid-term dividends.

Bank of America released a research report stating that it has initiated coverage on POWER ASSETS (00006) with a "buy" rating for the first time, with a target price of HK$63. The company is expected to achieve an annual compound growth rate of 6% in profit for the financial years 2024 to 2027, as regulatory adjustments in 2025-26 will significantly increase the return on equity of its Australian assets. The capital expenditure driven by energy transformation will also benefit the company's regulated electricity grid business. In addition, its 50% profit from the UK will also benefit from the depreciation of the US dollar. The bank pointed out that acquisition activities and capital recycling may bring additional upside potential to working capital, and expected growth in working capital will surpass dividend growth, thereby creating potential growth space for mid-term dividends. The forecast dividend yield for POWER ASSETS in 2026 is 5%, which is the highest level among peers in Hong Kong, making it attractive in the bank's opinion. The easing cycle of the Federal Reserve and potential success in mergers and acquisitions will serve as catalysts for the stock price.