Citigroup expects CK ASSET to achieve better profit margins this year, with a target price slightly raised to HKD 54.8

Citi published a research report indicating that CK ASSET (01113.HK) is expected to see a 2.3% year-on-year growth in core profit to HKD 12 billion for the fiscal year 2025; the dividend per share is HKD 1.78, also a 2.3% year-on-year increase. The management is taking a cautious stance amid geopolitical uncertainties, believing it is too early to discuss the use of proceeds from the sale of the UK Power Networks (UKPN). CK ASSET emphasizes creating long-term value through operations and is open to business value release, viewing share buybacks as a way to return value to shareholders and will seize opportunities to do so.

Fundamentally, the bank expects the group's earnings per share from 2026 to 2028 to be driven by improvements in the sales of development properties and a bottoming out of profit margins after provisioning, supporting dividend growth under a stable payout ratio (including the proceeds of HKD 617 million from the sale of the UK railway in the distributable profit for 2026).

Citi believes that CK ASSET is likely to achieve higher contract sales in 2026 (compared to HKD 10 billion in 2025) and better profit margins (with a 4.2% operating profit margin for Hong Kong development properties in 2025), mainly benefiting from (1) price increases, (2) optimizing launch timing to expand returns, and (3) estimating that the new launch pipeline has sellable resources exceeding HKD 18 billion. After experiencing more adequate provisioning, the bank expects the profit margins of development properties to gradually recover. CK ASSET has participated in land bidding in Hong Kong but avoids a "must-win" mentality and bids cautiously. In terms of leasing, moderate growth overseas offsets weak leasing in Hong Kong. In the infrastructure business, CK ASSET is open to acquisition offers to release its infrastructure equity value (estimated at HKD 85 billion).

Citi maintains a "Buy" rating on CK ASSET, with a target price slightly raised from HKD 54.55 to HKD 54.8