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On Friday, Citi analysts revised their stance on Power Asset Holdings (6:HK) (OTC: HGKGF), downgrading the stock from Buy to Neutral and adjusting the price target to HK$48.00 from the previous HK$61.00. The revision was influenced by the stock’s yield, which at an estimated 5.7% for 2025, is not considered sufficiently attractive when compared to the current 4.3% yield of the US 10-year treasury note.
The analysts pointed out that historically, Power Asset Holdings’ yields have been significantly above the treasury yield by 3.2%, 2.7%, and 1.9% over the last 5, 10, and 20 years, respectively. However, this margin has now narrowed to just 1.4%. The firm also noted the potential resilience of the US 10-year treasury yield in light of inflation concerns in the US, which may be heightened due to increased tariffs.
The report further stated that while Power Asset Holdings and its parent company, CK Infrastructure Holdings Limited (CKI), might be considering the acquisition of Thames Water, any such move could be delayed due to the complexity of Thames Water’s debt restructuring process. As a result, the analysts do not see this as an immediate catalyst for the stock.
Additionally, Citi analysts have reduced their net profit forecasts for Power Asset Holdings for the years 2025-26 by 2%, after taking into account updates to exchange rates and the weighted average cost of capital (WACC). The new sum-of-the-parts (SOTP) target price represents a 21% decrease from the previous target.
The downgrade and price target adjustment reflect Citi’s recalibrated expectations for Power Asset Holdings’ financial performance and its comparative yield attractiveness in the current market environment.
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