UBS: Maintains MTR Corporation's (00066) target price of HK$25 rating as “sell and sell”

The Zhitong Finance App learned that UBS released a research report stating that it maintains the MTR Corporation's (00066) target price of HK$25 and the “sale” rating. The bank expects the MTR's recurrent EBIT to remain basically flat in the first half of 2026. Transportation business is expected to decline slightly, as strong cross-border passenger traffic growth may be offset by frozen fares and rising costs.

At the same time, the continued reduction in rent renewals continues to put pressure on profits, leading to a decline in rental income from the station commercial and property leasing businesses. Retail sales growth for MTR tenants is expected to be broadly consistent with the overall market. Despite this, rent amplification is expected to continue to improve in the first half of 2026, narrowing from -9% to -10% in 2025. The bank predicts that basic profit for the first half of 2026 will drop slightly by 2% year-on-year to HK$8.8 billion.

On July 9, the Hong Kong Government officially confirmed the Pak Shek Kok Station plan. The project is scheduled to begin in the second half of 2028 and is expected to be completed by 2033. The bank previously estimated the total cost of the project to be around HK$7 billion. The Government has made a preliminary proposal to allocate two plots of land to the MTR Corporation for future property development. However, these two plots are not expected to be developed until 2031 and 2029, respectively. The Hong Kong Government and Hong Kong are expected to announce detailed financing arrangements within the next 12 months. On the other hand, the bank expects to announce more details of the Northern Line Phase II project within the next 3-6 months.