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<Research>Daiwa: CKI Sale of UKPN Delivers Exceptional Long-term Returns; Outperform Maintained
Recommend 5 Positive 11 Negative 7 |
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Daiwa published a research report covering CKI HOLDINGS (01038.HK), POWER ASSETS (00006.HK), and CK ASSET (01113.HK), which had announced the disposal of their entire stake in UK Power Networks (UKPN) to the French utility company Engie. The transaction's equity value is approximately GBP10.55 billion (about HKD110.8 billion). CKI described this transaction as "too good to resist". Compared to the failed Macquarie transaction in 2022, the regulated asset base (RAB) of UKPN increased from about GBP7 billion to approximately GBP9.5 billion, given rising inflation and incentives. The broker expected the deal to entail HKD44 billion in proceeds to CKI, alongside HKD9.5 billion in cash from the earlier UK rail transaction, effectively transforming CKI from a forecasted net debt of HKD11 billion in 2025 to a net cash position of approximately HKD41 billion in 2026. Despite likely being in a net cash position, Daiwa foresaw no significant changes in the dividend policies of CKI and PAH, viewing the interest income generated from the cash recovered from the UKPN disposal, and believed its operating cash flow will remain largely unchanged. The broker saw the UKPN disposal as primarily about crystallizing an exceptional long‑term return at a reasonable multiple. CKI was rated Outperform. AASTOCKS Financial News Website: www.aastocks.com |
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