Utilities Sector

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500 names.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2026.
• Currently, we see 30 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index. These are the maximum number of changes allowed per review.

• Fresh insight into CDC’s accelerating growth, renewable-energy opportunities and the portfolio’s evolving strategic direction are expected at Infratil’s investor day.
• Infratil’s strategy in focus at this Wednesday’s investor day Citi anticipates a positive share price catalyst from the event CDC remains the growth engine, with Longroad’s contribution rising FY27 to see more asset recycling and accelerated investment across the portfolio

• ENN Energy (2688 HK)‘s 1H26 results demonstrated that, even without ENN Natural Gas (600803 CH)‘s privatisation, its fundamentals remain solid. 
• Its gross margin decline has stabilised; with cost control initiatives, the FY26 earnings will stay healthy. Upside will come from improvement in the IE and smart home segments.
• At 7.6x PER for FY26 and FY27, it is among the cheapest in the HSI and the gas utilities sector. Its P/B is now over 1SD below average. 

• YTL Power International (YTLP MK) has moved from a utility company to an AI value chain that commands higher valuation. 
• It partners with NVIDIA Corp (NVDA US)to build data centers in Johor area. 
• It also acts as foreign currency accumulator, as it borrows in MYR and receive revenue in both GBP (GBPUSD CURNCY) and SGD (USDSGD CURNCY) .

• The tightness of the operation is very good based on the cash conversion cycle
• The company is very good at generating consistently positive operating cash flow
• The efficiency is very good when looking at the growth in sales relative to the growth in assets

• Short sellers made bold moves the week of August 31.
• MOO saw the most dramatic buildup – short interest tripled in seven days.
• At the other end, MSFT shorts nearly disappeared entirely, and GME saw rapid covering ahead of its September 8 earnings.

• It has been reported in numerous local media that the Korean government is seriously considering on merging Korea Gas (036460 KS) (KOGAS) with Korea National Oil Corporation (KNOC).
• I have a negative view on this merger since it worsens KOGAS’s balance significantly. As such, the speculation about a potential merger is likely to push KOGAS’s share price lower.
• KNOC already faces meaningful bankruptcy risks. Therefore, if these two companies merge, one of the worst case scenarios is a massive capital raise at the expense of diluting existing shareholders. 

• The proposed merger of KOGAS and Korea National Oil Corporation (KNOC) into a new entity, “Energy Resources Corporation,” announced on September 3, 2026, faces immense balance sheet and legal hurdles. KNOC is in complete capital impairment with liabilities exceeding assets by over 2.5 trillion won and total debt of around 21 trillion won. Meanwhile, KOGAS carries over 40 trillion won in debt of its own. Merging these entities risks balance sheet contagion unless the government successfully partitions KNOC’s toxic exploration assets into a separate liquidation subsidiary.
• The revised Article 382-3 of the Korean Commercial Act, which went into effect in July 2025, has fundamentally changed the legal landscape for state-driven mergers. For the first time, directors owe a statutory fiduciary duty of loyalty directly to shareholders, not just the abstract company entity. KOGAS’s minority shareholders, who own 45% of the company, now have clear legal grounds to file direct civil lawsuits and block the transaction if board members accept an exchange ratio or debt transfer that dilutes or damages minority equity.
• KOGAS’s uncollected receivables (misu-geum) remain stubbornly high at 14.178 trillion won as of the first half of 2026. While higher international LNG prices and currency depreciation have increased procurement costs, the raw material cost pass-through mechanism remains politically suppressed for residential city gas. To fully recover misu-geum and normalize the balance sheet, wholesale tariffs would need a steep adjustment of at least 20% to 30%. However, with a new politically appointed CEO, Hong Eui-rak, taking office in July 2026, the board is highly unlikely to challenge Ministry of Trade, Industry and Energy (MOTIE) directives to prioritize consumer inflation over minority shareholder returns.

• Engie remains our preferred implementation trade: confirmed inclusion, 19.3x ADV of estimated buying and 5.3% relative underperformance into the review cut-off.
• Nokia faces 9.6x ADV of estimated buying, but its 10.5% relative outperformance into the cut-off leaves less room for an implementation trade.
• WKL and VOW3 each face 6.0x ADV of estimated selling, but we would not chase either after their sharp post-announcement declines.

• The persistent 35% to 40% holding company discount at YTL Corp is driven by a market-implied negative valuation of approximately RM8.3 billion assigned to its unlisted assets (such as YTL Construction and the 165-acre Sentul landbank), coupled with structural bottlenecks that restrict cash up-streaming from its core listed units.
• The March 26, 2026 Competition and Markets Authority (CMA) final determination provided only marginal relief for Wessex Water by raising the allowed real CPIH WACC to 4.20% (up from Ofwat’s 4.03%) and adding £106 million in allowed revenue. This settlement remains highly restrictive, forcing Wessex to absorb substantial capital deficits and limiting its ability to distribute cash up to YTL Power.
• YTL PowerSeraya’s exceptional profitability is actively normalizing downward as Singapore’s Temporary Price Cap (TPC) mechanism and the Energy Market Authority’s (EMA) April 2026 Replanting Framework compress pool margins, shifting the group’s domestic growth dependency entirely onto the execution of the 500+ MW Kulai Green Data Center Park in Johor.

• The September 2026 index review results for the ES50 index were announced yesterday after market close.
• There will be two ADDs and two DELs for the index. This is in line with our expectations.
• The Inclusion/Exclusion events will take place at the close of trading on Friday 18 September 2026. We see US$5bn+ in one-way flow.

• YTL Corp (YTL MK)‘s simple ratio – YTL/YTL Power International (YTLP MK) – has eked out a new all-time low. The implied stub is similarly around an all-time low.
• Preceding my comments on YTL and 52%-held YTL are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%

• RelyEZ Energy Storage Technology (RLZEZ HK) is looking to raise up to US$150m in its upcoming Hong Kong IPO. The deal will be run by CMB International.
• It is a leading integrated Energy Storage System (ESS) solutions provider in China.
• The firm focuses on delivering comprehensive, high-quality, and scalable ESS solutions, hardware products, software systems/platforms, and supporting services.

• Although the 68.4% YoY decline in Q1 FY3/27 OP may appear soft on the surface, this dip was anticipated and primarily driven by the planned concentration of regular biomass facility maintenance.
• Looking past this temporary noise, execution against core growth pillars remains robust.
• Recent milestones include securing ¥7.2bn in project finance for the 100MW Fukuroi Ugari Battery Energy Storage System (BESS), marking the successful rollout of its second large-scale merchant facility. 

• Sempra Energy (NYSE: SRE) presents institutional investors with a premier hybrid utility and energy infrastructure platform, combining high-quality regulated transmission and distribution (T&D) utilities in premier growth corridors (California and Texas) with globally strategic LNG export infrastructure.
• The company is uniquely positioned to capture unprecedented electricity demand growth driven by data center expansion, artificial intelligence workloads, and industrial onshoring across Texas via its majority-owned Oncor utility franchise, underpinning a multi-year $13+ billion capital deployment plan.
• While multi-year growth fundamentals and regulatory support remain robust, heavy ongoing capital expenditures have driven Free Cash Flow into negative territory (-$6,047 million in 2025), necessitating disciplined balance sheet stewardship and execution amidst elevated interest rate environments.

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• Power Grid has work-in-hand of ~5x FY27 capex guidance, while 1QFY27 showed a clear improvement in execution through stronger capitalisation and continued TBCB wins.
• India’s transmission opportunity remains structurally strong, and we believe Power Grid is entering an operational recovery phase. The key catalyst is sustained project execution and monetisation through 2027e.
• We value Power Grid at 3.5x FY28E P/B, implying 60%+ upside over a medium-term horizon, largely driven by re-rating as execution and tariff conversion become more visible.