Utilities Sector

• China Power International (2380 HK) kicked off FY24 with an impressive 51.5% surge in 1H24 net profit. All business segments improved YoY, with hydropower being the best. 
• Both volume growth and cost reduction are the key drivers, supporting a 7.2pp gross margin expansion. The 5pp increase in the proportion of hydropower sold also lifted profitability.
• CPI will grow its capacity to 52GW by end FY24, a 15.5% YoY and 7.8% HoH increase. Moreover, the upside will come from more asset injection from its parent.

• With the review cutoff done, there should be two changes for the CSOP FTSE China A50 (HKD) (2822 HK) / iShares FTSE/Xinhua A50 China (2823 HK) ETFs in September.
• Huaneng Lancang River Hydropow (600025 CH) and China National Nuclear Power (601985 CH) should replace China Tourism Group Duty Free Corp (601888 CH) and Yihai Kerry Arawana (300999 CH).
• China Tourism Group Duty Free (1880 HK) will be deleted from a global index later this month and there could be some opportunities to trade the A/H arb.

• At 5.4% for FY24-26F, Hong Kong & China Gas (3 HK) has the second-highest dividend yield among its HK utility peers. A lower US rate makes it attractive.
• An unchanged interim DPS of HK$0.12 despite a decline in reported net profit suggests the resilience of its dividend stream. Core operating profit has increased 2%.
• While gearing has gone up, HKCG still has excellent cash-generating ability (FY23: HK$10.9bn). It has also cut back in capex with a 33% YoY drop for 1H24. 

• The Aussie Tax-Loss Selling Baskets worked very well on the sell side from 30 April through end-June 2024. What now?  Unwind.
• CK Infrastructure Holdings (1038 HK) has now submitted an application for a secondary listing, not a dual-primary listing, on the London stock exchange. Admission expected on the 19th August. 
• The right trade is to buy JTower (4485 JP) below terms. The really right trade is to already be an owner. IF you’re an arbitrageur, you know what to do.

• TLN benefited from warmer weather in the second quarter with its power plants running without any issues. The increase in electricity demand resulted in TLN reporting adjusted EBITDA higher estimates. 
• TLN’s management suggesting there could be more data center deals in the future was the biggest takeaway from the earnings call. 
• Considering the added benefit of the auction results for 2025-26, we believe there is ample reason to expect TLN’s stock to trade above our price target of $145.

• Revenue for 1H FY12/24 was JPY8.7bn, down 7.9% YoY, achieving 42.5% of the full-year forecast.
• Gross profit for the Recurring business grew 18.4% YoY, while Spot business revenue and gross profit declined over 50% YoY.
• Operating profit decreased 14.8% YoY to JPY1.5bn, achieving 29.7% of the full-year forecast.

• Hong Kong utilities have performed well on an absolute basis and even better on a relative basis this year.
• We revisit our original call on them from  January 2024
• Continued market volatility and future US  interest rate cuts will provide continued support.

• Ferrellgas is the second-largest retail propane distributor in the United States, serving various customer segments such as residential, commercial, industrial, agricultural, and wholesale.
• The company has a strong logistics network and holds a significant market share in the domestic tank exchange business through the Blue Rhino brand.
• Founded in 1939 in Atchison, Kansas, Ferrellgas has a history of growth through organic expansion and acquisitions, successfully navigating a post-bankruptcy reorganization and currently led by Executive Chairman James Ferrell.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess China Oil & Gas’ ESG as “Adequate”, in line with the Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND inflow strong. SOEs, Tencent, and Xiaomi leading. NORTHBOUND down four of five days this week, but net inflows on the week. Consumer discretionary bad.
• Hs underperformed As again. 20d AH Premia performance is at the top of its multi-year range. I’d expect AH Premia to decline the next couple of weeks.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 3.2bn of A-shares. Wednesday was a BIG buy day. Every other day was a net sell. 
• HK and Mainland large caps generally performed equally, down but much better than the rest of the world, but Hs in H/A pairs underperformed.

• PJM published the Base Residual Auction results for the 2025-26 planning year that were the highest on record. PJM is the primary region TLN serves.
• TLN announced participation in the auction and cleared 6,820 megawatts of electricity at the auction price of $269.92 per megawatt. 
• TLN anticipates generating approximately $670 million in capacity revenue during the auction year. This compares to approximately $160 million run rate TLN had been reporting capacity revenue in recent quarters.