Towngas slumps 15 per cent after missing profit estimates, surprise suspension of bonus shares
- Towngas posted a 16.5 per cent drop in net profit to HK$5.01 billion (US$640 million) last year, 36 per cent lower than analysts’ estimates of HK$7.8 billion
- Citi and Daiwa analysts slash target prices on Towngas stock citing dimmer profit outlook
Hong Kong and China Gas (Towngas) shares plunged by as much as 15 per cent after the gas distributor posted worse-than-expected annual results and suspended its long-standing practice of issuing bonus shares.
Analysts slashed the target prices on the stock citing a dimmer profit outlook, particularly on the mainland where the squeeze on its profit margin was worse than its rivals. It is one of the few Hong Kong utilities stocks favoured by investors looking for stable dividends.
“We reiterate our sell rating on [Towngas] after it reported earnings miss for 2021, with profit drops from both Hong Kong and China, as well as no bonus dividend which was the first time since 2008,” wrote Citi’s head of Asian utilities and clean energy research Pierre Lau in a note.
His team has slashed the net profit forecast for Hong Kong’s sole piped gas distributor and one of the largest players on the mainland by 15.1 per cent for this year and by 13.9 per cent for next year.
Citi also cut their target price on the stock by 10 per cent to HK$10.8. Daiwa Capital Market’s analysts lowered theirs by 27 per cent to HK$9.8.