Bank of America initiates a "Buy" rating on Power Assets with a target price of HKD 63, expecting growth potential for interim dividends

Bank of America published a report, initiating coverage on Power Assets Holdings (00006.HK) with a "Buy" rating and a target price of HKD 63. The bank expects the company's earnings compound annual growth rate to reach 6% from fiscal year 2024 to 2027, as regulatory adjustments from 2025 to 2026 will significantly enhance the return on equity of its Australian assets. Additionally, capital expenditures driven by energy transition will benefit the company's regulated grid business. Furthermore, its 50% earnings from the UK will also benefit from the depreciation of the US dollar.

The bank indicated that acquisition activities and capital recycling may provide additional upside for working capital, and it expects working capital growth to outpace dividend increases, thereby creating potential growth space for mid-term dividends. Power Assets Holdings is projected to have a dividend yield of 5% in 2026, which is the highest level among its peers in Hong Kong, making it attractive. The Federal Reserve's interest rate cut cycle and potential successful mergers and acquisitions will serve as catalysts for the stock price