Jefferies released a research report stating that it gave the MTR Corporation (00066) a “holding” rating, with a target price of HK$23.5. The company's management recently met with investors in Tokyo, Japan. Investors are very interested in the recovery of Hong Kong's transportation business, and are more willing to pay attention to medium- to long-term growth prospects. At the same time, they are happy to see the Hong Kong government's recent “withdrawal” of the property market.
The bank pointed out that in 2024, passenger traffic from local transportation services continued to increase, reaching 95% and 100% of traffic volume in January and February respectively; high-speed rail also showed strong momentum as entry and exit increased, and the recovery of the Airport Express Line is lagging behind, which may be related to the late reopening of Hong Kong compared to other regions. Management believes that a further recovery in traffic volume is critical to the correction of EBIT. It is expected that future cost inflation will be manageable, which may be partially offset by increasing ticket prices.
The report quoted management as saying that MTR's development projects are more defensive than other Hong Kong real estate agents, and the combination of rich project pipelines, different site choices, real estate agents and agreement structures can spread risk. Property market sentiment may affect developers' willingness to invest in land. It is expected that only a new plot of land in Tung Chung East will be launched within the next 12 months. Management also said that the MTR has a dividend payment policy of steady growth and has not set a target dividend rate or dividend ratio, but believes that a dividend rate of about 5% is a reasonable level due to different risk profiles or unsuitable for comparison with other real estate agents.