Hawaiian Electric Industries Inc.HE

Morningstar Rating

Stock Research and Analysis

by Ryan McLean

We find Hawaiian Electric's pairing of electricity and banking an odd combination. Moreover, neither unit possesses compelling investment merits, in our opinion.

Hawaiian Electric derives almost two thirds of earnings from its narrow-moat, medium-uncertainty Read more

Bulls Say

Hawaii's geographic isolation implies reluctance among regulators to deregulate or otherwise undermine Hawaiian Electric's long-term financial viability.

Hawaiian was granted rate relief totaling $76 million in 2008, and an outstanding rate request for some $97 million more could further boost earnings.

New generation facilities should allow the firm to ease the operational burden on its current facilities, reducing operations and maintenance expense.

Hawaii's Clean Energy Initiative offers the possibility of revenue decoupling and investment potential in new power sources and customer conservation. Read more

Bears Say

Hawaiian Electric has consistently earned lower returns on equity than those allowed by regulators.

Given the company's goal of ratcheting down its dividend payout ratio to 65%, shareholders should not expect dividend increases anytime soon.

A prolonged downturn in tourism would have far-reaching effects on the Hawaiian economy and, consequently, Hawaiian Electric's utility and banking businesses.

ASB is a less efficient bank than its main competitors. Read more

Strategy

The main strategic development at Hawaiian Electric is occurring in the banking division. ASB plans to increase its exposure to the higher-yielding commercial loan market to boost interest margins. On Read more

Management

Constance Lau was named president and CEO of Hawaiian Electric Industries in 2006. She also serves as chairman of Hawaiian Electric Company and chairman, president, and CEO of American Savings Bank. We think Lau's varied experience on both the utility Read more

Profile

Hawaiian Electric Industries is a utility holding company. The firm owns and operates three vertically integrated utilities that together supply electricity to 95% of Hawaii's Read more

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