2.HK WACC - Weighted Average Cost of Capital
The WACC of CLP Holdings Ltd (2.HK) is 5.6%.
| Range | Selected | |
| Cost of equity | 5.2% - 7.7% | 6.45% |
| Tax rate | 17.8% - 18.6% | 18.2% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 4.6% - 6.6% | 5.6% |
| Category | Low | High |
| Long-term bond rate | 2.9% | 3.4% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.38 | 0.55 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.2% | 7.7% |
| Tax rate | 17.8% | 18.6% |
| Debt/Equity ratio | 0.4 | 0.4 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 4.6% | 6.6% |
| Selected WACC | 5.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| 2.HK | CLP Holdings Ltd | 0.4 | 0.06 | 0.04 |
| 1038.HK | CK Infrastructure Holdings Ltd | 0.15 | -0.07 | -0.06 |
| 2638.HK | HK Electric Investments Ltd | 0.94 | 0.09 | 0.05 |
| 5110.SR | Saudi Electricity Company SJSC | 2.31 | 0.89 | 0.31 |
| 6.HK | Power Assets Holdings Ltd | 0.02 | -0.09 | -0.09 |
| 9504.T | Chugoku Electric Power Co Inc | 10.75 | 0.64 | 0.07 |
| IRAO.ME | Inter RAO YEES PAO | 0.22 | 0.48 | 0.41 |
| POWERGRID.NS | Power Grid Corporation of India Ltd | 0.46 | 1.01 | 0.73 |
| RSTI.ME | Rossiyskiye Seti PAO | 5.03 | 1.1 | 0.21 |
| TENAGA.KL | Tenaga Nasional Bhd | 1.07 | 0.86 | 0.46 |
| Low | High | |
| Unlevered beta | 0.06 | 0.25 |
| Relevered beta | 0.07 | 0.33 |
| Adjusted relevered beta | 0.38 | 0.55 |
2.HK's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for 2.HK:
cost_of_equity (6.45%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.38) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.