The Hong Kong And China Gas Company: Value Creating But Not Value Maximizing For Shareholders [Seeking Alpha]
HONG KONG&CHINA GAS S/ADR (HOKCY)
NASDAQ:AMEX Investor Relations:
en.wikipedia.org/wiki/hong_kong
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Source: Seeking Alpha
Summary HOKCY's large valuation premium over peers is due to its monopolistic position and its unregulated tariff setting ability in its core Hong Kong market. However, since 2008, management made a major strategic change in corporate direction and decided to expand into China in pursuit of growth. On one hand, this represented a diversion of cash flows that could have been distributed to shareholders in the form of large dividends. On the other hand, HOKCY's PRC operations' low ROA and ROIC belie its value creation. HOKCY enjoys low cost of capital. Companies should invest as long as ROIC exceeds WACC. Value creation is not value maximization. Investors could likely have redeployed dividends from HOKCY to earn returns above mid-single digits (which is the return of HOKCY's PRC business). Hong Kong and China Gas ("HKCG") ( OTCPK:HOKCY "Safety Regulation and the Rise of Towngas in Hong Kong" Being a monopolistic utility business whose tariff is not regulated and not linked to capex is
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