SEHK:2638

Stock Analysis Report

HK Electric Investments and HK Electric Investments

Executive Summary

HK Electric Investments and HK Electric Investments Limited, a vertically integrated power utility, generates, transmits, distributes, and supplies electricity in Hong Kong Island and Lamma Island.

Rewards

Earnings are forecast to grow 2.16% per year

Risk Analysis

Debt is not well covered by operating cash flow

Dividend of 4.71% is not well covered by earnings or forecast to be in the next 3 years



Snowflake Analysis

Imperfect balance sheet with concerning outlook.


Similar Companies

Share Price & News

How has HK Electric Investments and HK Electric Investments's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: 2638 has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

1.1%

2638

1.0%

HK Electric Utilities

2.2%

HK Market


1 Year Return

1.2%

2638

-5.3%

HK Electric Utilities

-0.8%

HK Market

Return vs Industry: 2638 exceeded the Hong Kong Electric Utilities industry which returned -5.3% over the past year.

Return vs Market: 2638 exceeded the Hong Kong Market which returned -0.8% over the past year.


Shareholder returns

2638IndustryMarket
7 Day1.1%1.0%2.2%
30 Day-1.4%-2.2%-0.6%
90 Day0.3%0.3%-0.9%
1 Year5.9%1.2%-1.3%-5.3%2.8%-0.8%
3 Year33.8%14.9%12.0%-6.8%19.5%7.4%
5 Year100.9%51.5%34.5%3.2%20.7%0.5%

Price Volatility Vs. Market

How volatile is HK Electric Investments and HK Electric Investments's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is HK Electric Investments and HK Electric Investments undervalued compared to its fair value and its price relative to the market?

24.33x

Price to Earnings (PE) ratio


Share Price vs. Fair Value

Below Fair Value: 2638 (HK$7.65) is trading above our estimate of fair value (HK$4.68)

Significantly Below Fair Value: 2638 is trading above our estimate of fair value.


Price To Earnings Ratio

PE vs Industry: 2638 is poor value based on its PE Ratio (24.3x) compared to the Electric Utilities industry average (14.5x).

PE vs Market: 2638 is poor value based on its PE Ratio (24.3x) compared to the Hong Kong market (10.2x).


Price to Earnings Growth Ratio

PEG Ratio: 2638 is poor value based on its PEG Ratio (11.3x)


Price to Book Ratio

PB vs Industry: 2638 is overvalued based on its PB Ratio (1.4x) compared to the HK Electric Utilities industry average (1.3x).


Next Steps

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 8 analysts?

2.2%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: 2638's forecast earnings growth (2.2% per year) is above the savings rate (1.6%).

Earnings vs Market: 2638's earnings (2.2% per year) are forecast to grow slower than the Hong Kong market (11.7% 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 (5.3%).


Next Steps

Past Performance

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

-3.1%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: 2638 has high quality earnings.

Growing Profit Margin: 2638's current net profit margins (24.9%) are lower than last year (28.1%).


Past Earnings Growth Analysis

Earnings Trend: 2638's earnings have declined by -3.1% per year over the past 5 years.

Accelerating Growth: 2638's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: 2638 had negative earnings growth (-16.3%) over the past year, making it difficult to compare to the Electric Utilities industry average (-14.7%).


Return on Equity

High ROE: 2638's Return on Equity (5.8%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

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


Financial Position Analysis

Short Term Liabilities: 2638's short term assets (HK$2.6B) do not cover its short term liabilities (HK$2.9B).

Long Term Liabilities: 2638's short term assets (HK$2.6B) do not cover its long term liabilities (HK$57.3B).


Debt to Equity History and Analysis

Debt Level: 2638's debt to equity ratio (91%) is considered high.

Reducing Debt: 2638's debt to equity ratio has reduced from 126.9% to 91% over the past 5 years.

Debt Coverage: 2638's debt is not well covered by operating cash flow (11%).

Interest Coverage: 2638's interest payments on its debt are well covered by EBIT (4.7x coverage).


Balance Sheet

Inventory Level: 2638 has a high level of physical assets or inventory.

Debt Coverage by Assets: 2638's debt is not covered by short term assets (assets are 0.1x debt).


Next Steps

Dividend

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

4.71%

Current Dividend Yield


Dividend Yield vs Market

company4.7%marketbottom25%2.3%markettop25%6.2%industryaverage4.4%forecastin3Years4.2%

Current dividend yield vs market & industry

Notable Dividend: 2638's dividend (4.71%) is higher than the bottom 25% of dividend payers in the Hong Kong market (2.27%).

High Dividend: 2638's dividend (4.71%) is low compared to the top 25% of dividend payers in the Hong Kong market (6.17%).


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's dividend payments have increased, but the company has only paid a dividend for 5 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (114.7%), 2638's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: 2638's dividends in 3 years are not forecast to be well covered by earnings (111.2% payout ratio).


Next Steps

Management

What is the CEO of HK Electric Investments and HK Electric Investments's salary, the management and board of directors tenure and is there insider trading?

10.2yrs

Average management tenure


CEO

Chi Tin Wan (69yo)

6yrs

Tenure

HK$17,940,000

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 ($USD2.29M) is above average for companies of similar size in the Hong Kong market ($USD610.22K).

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


Management Age and Tenure

10.2yrs

Average Tenure

57yo

Average Age

Experienced Management: 2638's management team is seasoned and experienced (10.2 years average tenure).


Board Age and Tenure

6.0yrs

Average Tenure

65yo

Average Age

Experienced Board: 2638's board of directors are considered experienced (6 years average tenure).


Insider Trading

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.


Management Team

  • Canning Fok (68yo)

    Executive Chairman

    • Tenure: 6yrs
    • Compensation: HK$730.00k
  • Dominic Chan (56yo)

    Executive Director

    • Tenure: 7.5yrs
    • Compensation: HK$3.01m
  • Mimi Yeung (55yo)

    General Manager of Public Affairs

    • Tenure: 16.4yrs
  • Chi Tin Wan (69yo)

    CEO & Executive Director

    • Tenure: 6yrs
    • Compensation: HK$17.94m
  • Francis Cheng (62yo)

    Executive Director & Operations Director

    • Tenure: 6yrs
    • Compensation: HK$5.78m
  • Tak Chow Yee (64yo)

    General Manager of Corporate Development

    • Tenure: 43.3yrs
  • Kim Man Wong (58yo)

    Chief Financial Officer

    • Tenure: 9.3yrs
  • Alex Ng (50yo)

    Group Legal Counsel & Company Secretary

    • Tenure: 11.1yrs
  • Dennis Kwong (54yo)

    General Manager of Human Resources

    • Tenure: 5.5yrs
  • Daobiao Chen (51yo)

    Executive Director

    • Tenure: 1.6yrs
    • Compensation: HK$2.40m

Board Members

  • Ronald Joseph Arculli (80yo)

    Non Executive Director

    • Tenure: 6yrs
    • Compensation: HK$180.00k
  • Victor Li (55yo)

    Deputy Chairman

    • Tenure: 5.1yrs
    • Compensation: HK$340.00k
  • Canning Fok (68yo)

    Executive Chairman

    • Tenure: 6yrs
    • Compensation: HK$730.00k
  • Dominic Chan (56yo)

    Executive Director

    • Tenure: 7.5yrs
    • Compensation: HK$3.01m
  • Francis Lee (78yo)

    Independent Non-Executive Director

    • Tenure: 6yrs
    • Compensation: HK$160.00k
  • Chi Tin Wan (69yo)

    CEO & Executive Director

    • Tenure: 6yrs
    • Compensation: HK$17.94m
  • Francis Cheng (62yo)

    Executive Director & Operations Director

    • Tenure: 6yrs
    • Compensation: HK$5.78m
  • Donald Jeffrey Roberts (67yo)

    Independent Non-Executive Director

    • Tenure: 6yrs
    • Compensation: HK$180.00k
  • Alex Fong (63yo)

    Independent Non Executive Director

    • Tenure: 6yrs
    • Compensation: HK$100.00k
  • Daobiao Chen (51yo)

    Executive Director

    • Tenure: 1.6yrs
    • Compensation: HK$2.40m

Company Information

HK Electric Investments and HK Electric Investments Limited's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: HK Electric Investments and HK Electric Investments Limited
  • Ticker: 2638
  • Exchange: SEHK
  • Founded: 1889
  • Industry: Electric Utilities
  • Sector: Utilities
  • Market Cap: HK$67.509b
  • Shares outstanding: 8.84b
  • Website: https://www.hkelectric.com

Number of Employees


Location

  • HK Electric Investments and HK Electric Investments Limited
  • Hongkong Electric Centre
  • 44 Kennedy Road
  • Hong Kong
  • Hong Kong

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
2638SEHK (The Stock Exchange of Hong Kong Ltd.)YesStapled SecuritiesHKHKDJan 2014
HKTDB (Deutsche Boerse AG)YesStapled SecuritiesDEEURJan 2014
HKCV.FOTCPK (Pink Sheets LLC)YesStapled SecuritiesUSUSDJan 2014

Biography

HK Electric Investments and HK Electric Investments Limited, a vertically integrated power utility, generates, transmits, distributes, and supplies electricity in Hong Kong Island and Lamma Island. As of D ...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2019/12/11 12:49
End of Day Share Price2019/12/11 00:00
Earnings2019/06/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.