UBS expects the operating EBIT loss of the MTR passenger transport business to narrow further, but even if passenger volume returns to 2018 levels, cost inflation is still a concern.
The Zhitong Finance App learned that UBS released a research report stating that it gave the MTR Corporation (00066) a “sell and sell” rating, with a target price of HK$21.4.
MTR reiterated its stable and progressive dividend payment policy at the UBS Asia Investment Forum and indicated that the actual amount will depend on a number of factors, including financial performance and future financing needs. Based on entering the new railway construction cycle, the company also expects the net debt ratio to rise further from 26.5% last year. The net debt ratio for the previous cycle had risen to about 50%. In terms of land sales, the company indicated that it will relaunch the first phase of Tung Chung East Station this year. It also indicated that the impact of the recent price reduction on properties built on Wong Chuk Hang Station is limited because the total payment guarantee for the project is guaranteed.
According to the report, the MTR indicated that recent consumption in the north posed challenges to the retail industry, but tenant sales in the first quarter fell by only 1% year on year, outperforming Hong Kong as a whole. The mall's performance outperformed the station store. Local non-essential consumer goods are still performing well, while makeup and fashion are lagging behind. Driven by the strong performance of high-end luxury brands, high-end shopping malls outperformed. In terms of passenger transportation, passenger traffic from the mainland has not fully recovered, and passenger traffic has returned to 90% before the epidemic. The bank expects the passenger transport business's operating EBIT loss to narrow further, but even if passenger volume returns to 2018 levels, cost inflation is still a concern.