UBS: POWER ASSETS (00006) performance broadly in line with expectations, maintains "buy" rating and target price of 70 Hong Kong dollars.

UBS released a research report stating that POWER ASSETS (00006) is expected to achieve a 2% year-on-year increase in recurring net profit to 6.2 billion yuan by 2025, with an annual dividend per share maintained at 2.82 Hong Kong dollars, equivalent to a dividend yield of 4.6%. The financing costs during the period increased by 35% year-on-year to 228 million Hong Kong dollars. Overall, the performance is in line with expectations. The bank believes that the favorable merger environment and the management's good acquisition track record support a positive view on the company, maintaining a "buy" rating and a target price of 70 Hong Kong dollars. The report points out that the business performance in various regions is robust, with the Australian business performing particularly well, with a 4% year-on-year increase in profit to 1.5 billion yuan, benefiting from the upward adjustment of allowed returns for SAPN since July last year, as well as increased revenue from connection fees in Victoria. The profit from the UK business remained stable at 3.2 billion yuan, mainly due to the normalization of higher one-time rebates for UKPN last year; NGN and WWU received favorable final decisions in December last year. In terms of guidance, management expects the completion of the UKPN divestiture by the end of June this year, valued at 4.2 billion pounds (approximately 44.3 billion Hong Kong dollars); UK rail revenue (1.9 billion Hong Kong dollars) was completed in January this year. In terms of regulatory resets, management views the upward adjustment of allowed returns for UK gas and Australian utilities positively. In terms of mergers and acquisitions, the group will focus on mature regulated energy markets and is willing to cooperate with China Yangtze Power and CK Asset. UBS expects the market reaction to the performance to be largely neutral, with focus shifting to cash deployment after the divestiture.