HK Electric Investments and HK Electric Investments (SEHK:2638) - Share price, News & Analysis

2638 fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	1/6
Past Performance	3/6
Financial Health	1/6
Dividends	1/6

2638 Stock Overview

Rewards

Trading at 21.5% below our estimate of its fair value

Earnings are forecast to grow 2.63% per year

Earnings grew by 7.4% over the past year

Risk Analysis

Debt is not well covered by operating cash flow

Dividend of 4.43% is not well covered by earnings or forecast to be in the next 3 years

HK Electric Investments and HK Electric Investments Competitors

Price History & Performance

Summary of all time highs, changes and price drops for HK Electric Investments and HK Electric Investments
Historical stock prices
Current Share Price	HK$7.23
52 Week High	HK$7.99
52 Week Low	HK$7.14
Beta	0.12
1 Month Change	-6.10%
3 Month Change	-8.37%
1 Year Change	-8.71%
3 Year Change	-9.63%
5 Year Change	0.70%
Change since IPO	35.39%

Recent News & Updates

May 26

Return Trends At HK Electric Investments and HK Electric Investments (HKG:2638) Aren't Appealing

What are the early trends we should look for to identify a stock that could multiply in value over the long term...

May 04

Is HK Electric Investments and HK Electric Investments (HKG:2638) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously...

Apr 13

HK Electric Investments and HK Electric Investments' (HKG:2638) Solid Earnings Have Been Accounted For Conservatively

HK Electric Investments and HK Electric Investments Limited's ( HKG:2638 ) solid earnings announcement recently didn't...

Mar 22

HK Electric Investments and HK Electric Investments (HKG:2638) Has Announced A Dividend Of HK$0.16

HK Electric Investments and HK Electric Investments Limited ( HKG:2638 ) will pay a dividend of HK$0.16 on the 11th of...

Shareholder Returns

	2638	HK Electric Utilities	HK Market
7D	-3.6%	-4.5%	2.1%
1Y	-8.7%	-7.1%	-23.3%

Return vs Industry: 2638 underperformed the Hong Kong Electric Utilities industry which returned -7.1% over the past year.

Return vs Market: 2638 exceeded the Hong Kong Market which returned -23.3% over the past year.

Price Volatility

Is 2638's price volatile compared to industry and market?
2638 volatility
2638 Average Weekly Movement	1.7%
Electric Utilities Industry Average Movement	2.8%
Market Average Movement	7.0%
10% most volatile stocks in HK Market	13.8%
10% least volatile stocks in HK Market	3.3%

Stable Share Price: 2638 is less volatile than 75% of Hong Kong stocks over the past 3 months, typically moving +/- 2% a week.

Volatility Over Time: 2638's weekly volatility (2%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1889	1,699	Chi Tin Wan	https://www.hkelectric.com

HK Electric Investments and HK Electric Investments Limited, an investment holding company, engages in the generation, transmission, and distribution of electricity in Hong Kong Island and Lamma Island. As of December 31, 2021, the company operated 6 coal-fired units, 5 oil-fired gas turbine units, 3 gas-fired combined-cycle units, 1 solar power system, and 1 wind turbine with an installed capacity of 3,617 megawatts. It also operated a transmission and distribution network of 6,734 kilometers; 4,100 substations; and 6,300 transformers, as well as served 584,000 residential, commercial, and industrial customers.

HK Electric Investments and HK Electric Investments Fundamentals Summary

How do HK Electric Investments and HK Electric Investments's earnings and revenue compare to its market cap?
2638 fundamental statistics
Market Cap	HK$63.89b
Earnings (TTM)	HK$2.93b
Revenue (TTM)	HK$11.34b

21.8x

P/E Ratio

5.6x

P/S Ratio

Is 2638 overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
2638 income statement (TTM)
Revenue	HK$11.34b
Cost of Revenue	HK$5.50b
Gross Profit	HK$5.85b
Other Expenses	HK$2.91b
Earnings	HK$2.93b

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

n/a

Earnings per share (EPS)	0.33
Gross Margin	51.54%
Net Profit Margin	25.86%
Debt/Equity Ratio	96.3%

How did 2638 perform over the long term?

See historical performance and comparison

Dividends

4.4%

Current Dividend Yield

96%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is 2638 undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for 2638?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for 2638. This is calculated by dividing 2638's market cap by their current preferred multiple.
What is 2638's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	HK$63.89b

2638 key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	9.7x
Enterprise Value/EBITDA	13.4x
PEG Ratio	8.3x

Price to Earnings Ratio vs Peers

How does 2638's PE Ratio compare to its peers?

2638 PE Ratio vs Peers

The above table shows the PE ratio for 2638 vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	14.5x

Forward PE

Price-To-Earnings vs Peers: 2638 is expensive based on its Price-To-Earnings Ratio (21.8x) compared to the peer average (14.5x).

Price to Earnings Ratio vs Industry

How does 2638's PE Ratio compare vs other companies in the Electric Utilities Industry?

Price-To-Earnings vs Industry: 2638 is expensive based on its Price-To-Earnings Ratio (21.8x) compared to the Hong Kong Electric Utilities industry average (18.1x)

Price to Earnings Ratio vs Fair Ratio

What is 2638's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

2638 PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	21.8x
Fair PE Ratio	9.6x

Price-To-Earnings vs Fair Ratio: 2638 is expensive based on its Price-To-Earnings Ratio (21.8x) compared to the estimated Fair Price-To-Earnings Ratio (9.6x).

Share Price vs Fair Value

What is the Fair Price of 2638 when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: 2638 (HK$7.23) is trading below our estimate of fair value (HK$9.21)

Significantly Below Fair Value: 2638 is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: 2638 is poor value based on its PEG Ratio (8.3x)

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Future Growth

How is HK Electric Investments and HK Electric Investments forecast to perform in the next 1 to 3 years based on estimates from 7 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

2.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: 2638's forecast earnings growth (2.6% per year) is above the savings rate (1.5%).

Earnings vs Market: 2638's earnings (2.6% per year) are forecast to grow slower than the Hong Kong market (17% per year).

High Growth Earnings: 2638's earnings are forecast to grow, but not significantly.

Revenue vs Market: 2638's revenue (3.4% per year) is forecast to grow slower than the Hong Kong market (10.3% per year).

High Growth Revenue: 2638's revenue (3.4% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: 2638's Return on Equity is forecast to be low in 3 years time (6.6%).

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Past Performance

How has HK Electric Investments and HK Electric Investments performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-6.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: 2638 has high quality earnings.

Growing Profit Margin: 2638's current net profit margins (25.9%) are lower than last year (26.3%).

Past Earnings Growth Analysis

Earnings Trend: 2638's earnings have declined by 6.7% per year over the past 5 years.

Accelerating Growth: 2638's earnings growth over the past year (7.4%) exceeds its 5-year average (-6.7% per year).

Earnings vs Industry: 2638 earnings growth over the past year (7.4%) exceeded the Electric Utilities industry 1.4%.

Return on Equity

High ROE: 2638's Return on Equity (6.1%) is considered low.

Discover strong past performing companies

Financial Health

How is HK Electric Investments and HK Electric Investments's financial position?

Financial Health Score

1/6

Financial Health Score 1/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: 2638's short term assets (HK$2.3B) do not cover its short term liabilities (HK$5.8B).

Long Term Liabilities: 2638's short term assets (HK$2.3B) do not cover its long term liabilities (HK$60.6B).

Debt to Equity History and Analysis

Debt Level: 2638's net debt to equity ratio (96.1%) is considered high.

Reducing Debt: 2638's debt to equity ratio has increased from 79.6% to 96.3% over the past 5 years.

Debt Coverage: 2638's debt is not well covered by operating cash flow (13.3%).

Interest Coverage: 2638's interest payments on its debt are well covered by EBIT (6.3x coverage).

Balance Sheet

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Dividend

What is HK Electric Investments and HK Electric Investments's current dividend yield, its reliability and sustainability?

Dividend Score

1/6

Dividend Score 1/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

4.43%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: 2638's dividend (4.43%) is higher than the bottom 25% of dividend payers in the Hong Kong market (2.74%).

High Dividend: 2638's dividend (4.43%) is low compared to the top 25% of dividend payers in the Hong Kong market (7.89%).

Stability and Growth of Payments

Stable Dividend: 2638 has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: 2638 has only been paying a dividend for 8 years, and since then payments have fallen.

Earnings Payout to Shareholders

Earnings Coverage: With its high payout ratio (96.5%), 2638's dividend payments are not well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (207.6%), 2638's dividend payments are not well covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

10.1yrs

Average management tenure

CEO

Chi Tin Wan (71 yo)

8.5yrs

Tenure

HK$19,020,000

Compensation

Mr. Chi Tin Wan has been the Chief Executive Officer of HK Electric Investments and HK Electric Investments Limited since December 5, 2013 and Executive Director since September 23, 2013. Mr. Wan serves as...

CEO Compensation Analysis

Compensation vs Market: Chi Tin's total compensation ($USD2.42M) is above average for companies of similar size in the Hong Kong market ($USD626.60K).

Compensation vs Earnings: Chi Tin's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: 2638's management team is seasoned and experienced (10.1 years average tenure).

Board Members

Experienced Board: 2638's board of directors are considered experienced (8.5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/26 00:00
End of Day Share Price	2022/06/24 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31