Towngas Shares Slide 14% After Profit Miss
By Yongchang Chin
Shares of Hong Kong & China Gas Co. Ltd., also known as Towngas, fell in early trading Tuesday after it reported weaker-than-expected earnings and declined to issue bonus shares.
The stock was last 14% lower at 9.94 Hong Kong dollars, taking its year-to-date loss to 18% and on track for its biggest one-day slide since 2008.
The Chinese gas distributor reported 2021 net profit of 5.02 billion Hong Kong dollars (US$641.5 million) after the market closed Monday. That was well below the HK$8.08 billion tipped by a FactSet poll of analysts as well as 2020's HK$6.01 billion. It said international commodity and energy prices rose sharply in the second half of 2021, cutting into its margins for gas sales.
The company also made a one-off provision of HK$1.5 billion for various write-offs and impairments.
Daiwa Capital Markets downgraded its rating on Towngas to sell from outperform and cut its target price to HK$9.80 from HK$13.50 to factor in expectations of weak earnings over 2022-2023 on a poor outlook for the company's Hong Kong and Chinese gas business.
Its mainland unit's gas-sales margins fell 0.11 yuan (2 U.S. cents) a cubic meter to CNY0.48 a cubic meter in 2021, Daiwa noted, adding that Towngas's 2022 margin guidance of CNY0.48 a cubic meter could be "challenging" given likely difficulties in passing on higher costs to end-users.
Daiwa also called the decision not to issue bonus shares this year a "huge surprise." The only other times Towngas didn't issue bonus shares were in 2002-2005 and in 2008, it said.
Write to Yongchang Chin at firstname.lastname@example.org
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March 21, 2022 23:42 ET (03:42 GMT)Copyright (c) 2022 Dow Jones & Company, Inc.