Witnesses to Hong Kong's many economic booms and busts - blue-chip utilities CLP Holdings, Hongkong Electric Holdings and Hong Kong and China Gas (Towngas) - are among the oldest local companies. Towngas, has grown its dominance in the piped gas market over the past 144 years, CLP has lit up Kowloon, the New Territories and Lantau for 105 years and Hongkong Electric has supplied electricity to Hong Kong and Lamma Islands for 116 years.
During this time, they have rapidly expanded along with the city's population and economy. But even as the growth of both has been historically slow for the past five year, the companies' share prices have ridden the current bull market, defying conventional wisdom that utilities are laggards during the good time but bear market stars.
They have been boosted by reporting better-than-expected interim results in the past few weeks. On Friday, CLP closed at HK$48.80, slightly off its historical peak of HK$50.10 hit on Monday, Hongkong Electric drifted to HK$36.75, also just below its historical peak of HK$37.56 set last December, while Towngas last traded at HK$18.18, compared with its all-time high of HK$19.11 reached in February.
'They are defensive stocks, which have some conservative investors as fans, even though the Hang Seng Index has recently been hovering [at a recent peak] between 17,300 and 17,400 points,' said Kitty Chan, a fund manager at CASH Asset Management. 'Attractive dividend payouts, high yields and virtually guaranteed core profits make them good investment choices even in a bull market.' It certainly isn't short-term forecasts that are effecting the shares. For this year, the estimated net profit for CLP is up 3.18 per cent to HK$9.66 billion, Hongkong Electric down 2.72 per cent to HK$6.81 billion and Towngas flat at HK$5.31 billion, according to Thomson First Call.
Neither is any boost coming from their price to earning ratio. Morgan Stanley's Simon Lee estimates that CLP's prospective P/E will remain stable in the three years to 2008, varying between 10.5 and 11.4 and Hongkong Electric between 10.7 and 11.7, while Towngas's will be relatively volatile, between 15.1 and 19, due largely to non-recurring profits from property development. This surpasses or is close to their historical peaks.
As Ms Chan noted, one thing going for the three is their historically bountiful dividends. On a full-year basis, CLP's dividend yield should be 5.3 per cent, the same as last year, Hongkong Electric 5.1 per cent, slightly lower that last year's 6 per cent, and Towngas 1.9 per cent against last year's 2.1 per cent, according to Morgan Stanley analyst Simon Lee.