JP Morgan: Even if the privatization offer for ENN ENERGY (02688) fails, it still has value. Maintains "overweight" rating.

J.P. Morgan's research report stated that even if the privatization offer for ENN Energy (02688) ultimately fails, it still holds good value at the current level. The bank believes that the market has already priced in the factor of the offer not being extended further, and that if the offer is extended, it could provide value to investors. J.P. Morgan maintains a "neutral" rating on ENN Energy with a target price of HK$68. The report mentioned that ENN Energy's stock price has dropped by about 25% since the beginning of the year, while the national index has only fallen by about 6% during the same period. This reflects a moderate gas industry fundamentals and the market's digestion of expectations that the privatization offer may not succeed. Last year, ENN Energy outperformed its peers due to the anticipation of privatization, but with the offer being extended for over a year, market expectations have cooled down, leading to the stock underperforming since the beginning of the year. J.P. Morgan pointed out that while it is difficult to predict the likelihood of the offer being extended, the incentive for the parent company to push for privatization may have decreased compared to a year ago. This is because LNG prices may remain high for a longer period, reducing the value of downstream businesses. Additionally, ENN Natural Gas (600803.SH), a subsidiary of the parent company, holds multiple LNG contracts that allow for more international trade. Therefore, the value of the offer involving ENN Energy in exchange for ENN Natural Gas may be lower than a year ago. The bank mentioned that the deadline for the privatization offer is this Friday (12th). Although New O Group has the right to extend the offer deadline, if they decide not to extend it, the offer may fail. Even if the offer does not go through, the bank believes that there is limited downside potential for the stock price. ENN Energy has committed to maintaining at least a stable dividend per share of HK$3, currently equivalent to a 5.8% dividend yield.