Published Mon, 29 Jun 2020 14:29:23 -0400 on Seeking Alpha
Seeking AlphaLong Ideas | Utilities | Hong KongPower Assets: A High-Yield, Acquisition Hungry Company On Sale With A Strong Balance SheetJun. 29, 2020 2:29 PM ET|| About: Power Assets Holdings Limited (HGKGF), HGKGYby: Sunset AnalysisSunset Analysis Value, long only, growth at reasonable priceSummaryPower Assets possesses one of the cleanest balance sheets of any company I have researched.
Their diversified base of utilities, in regulated environments or backed by long-term contracts provides them with stable earnings.
Shares have been punished by broader COVID selloffs and the announcement of a one time tax readjustment cost.
Thanks to this, shares are at a ten-year low and offer a 6.59% yield to investors as well as the opportunity for share price appreciation.
Trading very near to book value, there is next to naught in terms of downside risk.
The Investment Angle
In this uncertain environment of an ongoing recession + a global pandemic, it is prudent for investors to look for low-risk investments. There are few investments of a lower risk than Power Assets Holdings Limited (PAH), with a net cash position, 0.09 debt to asset ratio, and stable income from regulated utilities.
In addition to the low downside risk, Power Assets offers a 6.59% yield with a safe payout and is well-positioned to make acquisitions at depressed global asset prices. The company itself is also selling at a discount, due to a one-off charge expected in the first half of FY2020 and the market sell-off resulting from COVID-19.
Diversified, Regulated Business Means Security
Power Assets Holdings’ assets are diversified and deliver consistent income. PAH primarily invests in utility assets which are regulated in nature or transmission networks/renewables with long-term contracts or power purchase agreements.
The company receives the majority of its income from its associate businesses or joint ventures, which account for $698 million of their... Read more