J.P. Morgan Chase released a research report stating that Changjiang Infrastructure (01038), Changshi Group (01113), and Electric Energy Industry (00006) jointly announced that a joint consortium has acquired Phoenix Energy, a gas distribution network in Northern Ireland. At a cost of over 3 billion yuan, the valuation ratio of enterprise value (EV) to regulatory asset value (RAV) is about 1 times. Since this is the first major acquisition by the Changjiang Group in Europe in more than five years, it is expected to dispel market concerns that the business will be affected by geopolitical tension.
The bank pointed out that Phoenix Energy has more than 250,000 customers. Although the company lost money last year, it believes that with the strong execution and financial management capabilities of the Changjiang Group, it can turn losses into profits in the medium to long term. Overall, due to the small scale of this transaction, Motong expects little impact on the stock price. Maintaining a “neutral” rating for Changshi, it is expected that the stock price will fluctuate within a range in the short term, while continued share repurchases may support the stock price. The target price is HK$32. Motong rated Changjian and Electric Energy as “incremental” and “neutral” respectively, with a target price of HK$50.