HSBC: Positive View on the Sale of UK Power Networks by CKI Holdings (01038), Attractive Price Offered

Citibank released a research report stating that CKI HOLDINGS (01038), POWER ASSETS (00006), and CK ASSET (01113) have reached an agreement to sell their jointly owned UK Power Networks (UKPN) to the listed French utility company Engie for a total price of 10.548 billion pounds (approximately 110.754 billion Hong Kong dollars). It is expected that Cheung Kong Infrastructure will record sales proceeds of 14.5 billion Hong Kong dollars, while POWER ASSETS will record 10.7 billion Hong Kong dollars. Citibank believes that this transaction is positive, bringing in significant sales income. Citibank points out that as the cash yield that Cheung Kong Infrastructure will receive from UKPN in 2024 is only 3.6%, the sale will not significantly reduce its regular cash inflow. They also believe that the selling price is attractive, equivalent to 1.6 times the regulated asset base value of 9.2 billion pounds at the end of last year. According to Citibank's calculations, it is also equivalent to a multiple of approximately 12 times EBITDA for enterprise value last year, and provides "ammunition" for potential future acquisitions. Citibank rates Cheung Kong Infrastructure and POWER ASSETS as "buy", and rates CK ASSET as "neutral".