Morningstar

Morningstar, Inc.

Equity Bottom-Up

MTR Corp will take a HKD 2 billion provision for the construction issue at the Hung Hom station and another GBP 43 million, or HKD 430 million for its 30%-owned First MTR South Western Trains in the United Kingdom. Discussion with the government regarding a settlement for the construction issues at Hung Hom station is ongoing. MTR is responsible for the construction of the Shatin-Central Link, or SCL, project and is liable for any additional costs as set out in the agreement. Total liability is…

The first half of 2019 for MTR Corporation was relatively tranquil after a tumultuous 2018, with the company focused on executing on its rail and property operation. The same calm cannot be said about the company’s core operational geography of Hong Kong. We expect mixed impact on patronage from the recent protests. The high level of participation in the rallies may have resulted in increased patronage on some lines, and at the same time, may have deterred the wider population from moving about…

<p>Narrow-moat-rated MTR reported solid second-half and fiscal 2018 results. We have increased our fair value estimate to HKD 48 per share from HKD 43 and continue to see the rail operator as fairly valued. There is no change in our thesis, and the group’s resilient recurring income and cash flow will see the company trade as a defensive stock, particularly in a down market. This is supported by a forecast dividend yield of close to 3%. The final dividend of HKD 0.95 takes the fiscal 2018 dividend…</p>

<p>MTR submitted its investigation findings on a large service disruption in mid-October, which affected four of its high patronage subway lines. The issue lies within the existing signalling system, which was supplied by two separate companies progressively since 1996, and not due to the current signal upgrade program underway. MTR noted the incident will result in an HKD 8 million fine under the service performance arrangement. As highlighted in our company report, we note penalties applied to…</p>

Hong Kong

MTR Corporation Limited provides public transport services in Hong Kong.  The Company owns and operates the Mass Transit Railway.  The Company also develops, sells, and manages residential and commercial properties.  In addition, MTR leases commercial facilities and provides services along the Railway, such as advertising, telecommunication facilities, and provides consultancy services.

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