China Gas Holdings’ New Residential Connections Will Remain Weak in the Near Term

China Gas Holdings, or CGH, is involved in the wholesale and retail businesses of natural gas and liquefied petroleum gas, or LPG, in China. Benefiting from its exclusive city gas concession rights and efficient scale, the firm has been able to generate returns above its cost of capital, and we expect this to continue over the next decade, supporting our narrow moat rating for CGH. In the past, CGH aggressively expanded into rural city gas projects, resulting in a relatively stretched balance sheet compared with its peers. The firm now focuses on the asset-light value-added services business, as well as development of the urban heating business.