Bank of America Securities released a research report saying, reaffirming the “neutral” rating of CLP Holdings (00002), the target price was lowered from HK$69.2 to HK$67. Due to limited room for upward valuation, it predicts a dividend rate of 5% for the next 12 months, which is only 80 pips higher than the yield on US 10-year Treasury bonds, and more than one standard deviation below the historical average yield premium.
According to the report, the company's total dividend last year was the same as 3.1 yuan per share; last year's operating profit increased 33% year over year, which is also in line with earlier profit forecasts. According to the report, CLP's Australian wholesale business is expected to reverse losses this year because the low price contract has already expired. The Hong Kong business is expected to have a compound annual profit growth of 3% to 4% over the next five years. Due to capital expenditure of $52.9 billion under the 2024-2028 development plan, the capital base will expand, and debt costs (in anticipation of interest rate cuts) are expected to decrease.
The bank said that the group mentioned that the dividend policy must balance actual profits with future investment needs. The bank expects CLP's dividend per share to rise by 3% in 2024 and 2025, but the earnings forecast for each share will drop by 7% to 8% this year and next two years to 4.68 yuan and 4.83 yuan respectively, reflecting the decline in mainland electricity prices, putting pressure on mainland business profits; and Australian retail business profits are expected to be lower due to increased competition.