3.HK WACC - Weighted Average Cost of Capital

The WACC of Hong Kong and China Gas Co Ltd (3.HK) is 6.1%.

The Cost of Equity of Hong Kong and China Gas Co Ltd (3.HK) is 7.40%.

The Cost of Debt of Hong Kong and China Gas Co Ltd (3.HK) is 4.30%.

	Range	Selected
Cost of equity	6.00% - 8.80%	7.40%
Tax rate	21.20% - 22.20%	21.70%
Cost of debt	4.00% - 4.60%	4.30%
WACC	5.1% - 7.2%	6.1%

WACC

3.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.53	0.71

Additional risk adjustments	0.0%	0.5%
Cost of equity	6.00%	8.80%

Tax rate	21.20%	22.20%
Debt/Equity ratio	0.46	0.46
Cost of debt	4.00%	4.60%

After-tax WACC	5.1%	7.2%


Selected WACC	6.1%

3.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 3.HK:

cost_of_equity (7.40%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.53) + 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.