BEH's First-Half Results In Line; Shares Are Undervalued on Healthy Long-Term Outlook

Maintaining BEH's Fair Value Estimate; Shares Remain Undervalued

Beijing's Anti-Pollution Actions Should Drive Robust Gas Demand, and BEH Stands to Benefit

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Equity Bottom-Up

Beijing Enterprises Hldgs / Equity Bottom-Up

Our fair value estimate for BEH is HKD 58.00 per share. Our discounted cash flow-derived fair value estimate implies a forward fiscal-year price/earnings multiple of 12 times and an enterprise value/EBITDA ratio of 9 times.These metrics are slightly lower than the historical average for the five years ended 2015, reflecting our concerns over potential transmission tariff cuts, as well as slower natural gas consumption amid weakening China growth.Analyst: Jennifer Song

Our fair value estimate for BEH is HKD 58.00 per share. Our discounted cash flow-derived fair value estimate implies a forward fiscal-year price/earnings multiple of 12 times and an enterprise value/EBITDA ratio of 9 times.These metrics are slightly lower than the historical average for the five years ended 2015, reflecting our concerns over potential transmission tariff cuts, as well as slower natural gas consumption amid weakening China growth.Analyst: Jennifer Song

Beijing's Antipollution Actions Should Drive Robust Gas Demand, and BEH Stands to Benefit.