UBS: Raises target price of HKELECTRIC-SS (02638) to 6.4 Hong Kong dollars, maintains "neutral" rating.

UBS released a research report stating that it has raised the target price of HKELECTRIC-SS (02638) by 6.7%, from 6 Hong Kong dollars to 6.4 Hong Kong dollars, maintaining a "neutral" rating. The bank predicts that Hongkong Electric's distribution per unit (DPU) will remain at 0.32 Hong Kong dollars until 2028, which means that there is limited upside potential for its stock price at the current level. They believe that the key to reevaluation lies in the relative yield gap rather than profit growth. UBS still considers the company to be a high-quality, low-volatility income-generating asset and a purely regulated electricity company in Hong Kong. While Hongkong Electric is a high-quality company, its income support has weakened, and currently, the premium that investors receive from owning the company's stock is only 46 basis points above the yield of US 10-year treasuries, which is more than two standard deviations below its historical average and 135 basis points below the industry average.