Expect Weaker 2H China and Hong Kong Earnings, but Free Cash Flow Healthy; FVE Up to HKD 53

Power Assets Holdings, or PAH, in the absence of acquisitions, is likely to see a stable share price, supported by a sustained dividend payout. PAH’s key utility assets include U.K.-based power and gas networks as well as Australian utility distribution companies. Together, the U.K. and Australian assets made up more than 70% of profit and around 33% of cash flow in 2020. As a result, PAH’s earnings and fair value estimates are sensitive to currency fluctuations. A weaker GBP has impeded earnings gains; however, we don’t think the lower translated income will materially impede dividend payouts given PAH's near equal cash:debt position. We think PAH's dividend would be flat at worst with marginal rises probable.