In "Major Banks," China International Capital Corporation (CICC): Hong Kong utility stocks maintain high dividends, expected returns to improve in the new regulatory cycle

CICC's research report indicates that Hong Kong's utility stocks have disclosed their performance for 2025. First, the allowed return rates for some regulated businesses in the new regulatory cycle are expected to increase, consolidating investment returns. Second, Hong Kong utility stocks maintain high dividend payouts, with the dividend payout ratio for 2025 ranging from 77% to 96%, and the annual dividend per share remaining flat or slightly increasing by 1% to 2%.

The report states that Hong Kong utility stocks primarily invest in midstream transmission and distribution segments, obtaining allowed returns under the regulatory framework over a certain cycle, characterized by heavy assets, high barriers to entry, stable returns, and strong cash flows, aligning with the typical features of the "HALO strategy."

In terms of the Hong Kong region, the increase in average net fixed assets drives profit growth, and capital expenditures continue under the clean transition goals. HKELECTRIC-SS (02638.HK) and CLP (00002.HK) continue to advance their development plans for the 2024 to 2028 period. In the UK, the allowed return rates for the new round of regulated businesses have increased; CKH HOLDINGS is selling assets, expected to generate one-time gains of over HKD 10 billion each for Cheung Kong Infrastructure (01038.HK) and POWER ASSETS (00006.HK).

As for Australia, the allowed return rates for the new round of regulated businesses have also increased. The South Australian electricity network, invested by CKH HOLDINGS, will enter a new regulatory period starting July 1, 2025, with the company announcing an increase in allowed return rates; meanwhile, the Victoria grid is applying for a higher allowed return rate for the new regulatory period. However, EnergyAustralia's retail business is underperforming, mainly due to intensified competition in the energy retail market, rising costs, and depreciation