UBS: Selling UKPN is positive for POWER ASSETS

CK Infrastructure (01038.HK), POWER ASSETS (00006.HK), and CK ASSET (01113.HK) sold their entire stake in the UK distribution network operator UK Power Networks (UKPN) to the French energy company Engie, with a total transaction value exceeding HKD 110 billion, reportedly valuing the enterprise at HKD 176.8 billion.

UBS published a research report indicating that POWER ASSETS should account for approximately HKD 44.3 billion of the basic transaction value, expecting to record a profit of about HKD 10.7 billion. The report views this transaction as overall positive for POWER ASSETS, noting that the transaction valuation based on UKPN's regulated asset base (RAB) is attractive. However, from a capital allocation perspective, the bank believes that the likelihood of POWER ASSETS distributing a special dividend in the short term is low, as the company is more inclined to reallocate funds for potential new acquisitions. If suitable acquisition targets are lacking, the likelihood of distributing a special dividend will increase.

The bank estimates that the sale of UKPN will have a minimal impact on POWER ASSETS' earnings performance, maintaining a "Buy" rating on POWER ASSETS with a target price of HKD 70