The analyst rating for MTR Corporation was downgraded from Outperform to Hold due to several factors highlighted in the CLSA research report. The reasons include:
1. Flagging Recurring Profit Growth: The company's recurring profit growth is struggling, which is attributed to potential expenditure growth that could negatively impact profits.
2. Sluggish Revenue: MTR Corporation's revenue remains sluggish, further contributing to concerns about its financial performance.
3. Lowered Profit Forecasts: CLSA has significantly reduced its recurring profit forecasts for 2025-26 by 28% and 33%, indicating a more pessimistic outlook for the company's earnings.
4. Unattractive Risk-Reward Profile: The analyst does not find the risk-reward profile of MTR Corporation attractive, especially considering its dividend yield of 4.8% per annum.
5. Potential for Additional Financing: There is a possibility of convertible bond issuance or stock issuance, which could further dilute existing shareholders' value.
As a result of these factors, CLSA has cut the target price for MTR Corporation from HKD 30 to HKD 27.
