Lowering 2H 2021 Earnings but Free Cash Flow Remains Healthy; FVE Raised to HKD 53

We make minor tweaks to our profit forecast for Power Assets Holdings, or PAH, with lower China and Hong Kong income in second-half 2021 but free cash flow stays healthy. The net impact is lesser than a 3% cut in our 2021 net profit forecast to HKD 6.46 billion and marginally higher earnings in subsequent years. We still expect a 22% rebound in 2022 net profit to HKD 7.89 billion in the absence of additional charges. To recap, PAH is recording around HKD 551 million in deferred tax charges, which was already captured in its first-half 2021 results, related to the rise in the corporate tax rate in the U.K. to 25% from 19%. Free cash flow will be healthy due to the completion of the Husky Midstream pipeline expansion that raises dividend contribution from the asset. Going into 2022, our fair value estimate rises to HKD 53 from HKD 52 and shares remain attractive for investors looking for stable income. PAH is yielding around 5.7% and we expect dividends to remain flat at worst.