"Big Banks" Huayan raises CK ASSET target price to 46 yuan, performance meets expectations, rating "Hold"

HSBC Global Research published a report indicating that CK ASSET (01113.HK) is expected to meet performance expectations for the fiscal year 2025, with basic net profit increasing by 3% year-on-year to HKD 12 billion. The main highlight is the recovery of dividend growth, with the annual dividend per share increasing by 2% to HKD 1.78, ending the declining trend since 2022. The bank believes that amid rising global uncertainties, CK ASSET's financial strength and resilient recurring business should provide the defensive qualities sought by investors. If CK ASSET allocates part of the proceeds from the sale of the UK Power Networks (UKPN) as a special dividend to return to shareholders in the first half of 2026, the stock price may respond positively. However, the bank has not yet seen new drivers for profit growth, and the thin profit margins of Hong Kong residential projects may hinder CK ASSET's profit recovery.

The bank expects CK ASSET to return to a net cash position in the fiscal year 2026, mainly due to: 1) receiving sales proceeds from the Wong Chuk Hang project Blue Coast I and II; 2) and obtaining over HKD 22 billion in cash proceeds from the sale of its 20% stake in UKPN in the first half of 2025, which is believed to enhance CK ASSET's potential investment space in the future.

HSBC has lowered its earnings forecasts for CK ASSET for the next two years by 8.1% and raised them by 1.7%, respectively; the dividend payout ratio forecasts have been raised by 4.6% and 3.9%, respectively; and the net asset value (NAV) per share forecast has been raised by 2% to HKD 95.8 (previously HKD 93.9). The target price has been raised from HKD 41.3 to HKD 46; maintaining a "Hold" rating