United Utilities Tops Fiscal 2021 Expectations on Low Finance Costs, Shares Rich

We don't expect to materially change our fair value estimate of GBX 730 per share after United Utilities released fiscal 2021 results above Visible Alpha consensus and our own estimates thanks to a drop in finance costs. The underlying return on regulated equity was 4.8%, outperforming the 4% allowed base return. We expect the company to deliver an average outperformance of 55 basis points over the AMP7 period. The company will pay a GBX 43.2 dividend on 2021 results, 1.5% higher than last year, implying a 4.3% dividend yield, in line with the sector average. Our no moat, stable trend ratings are intact. Shares look materially overvalued.