Morningstar: Maintains Fair Value Forecast for Taigu A (00019) at 86 Hong Kong Dollars, Dividend Higher than Expected

Morningstar released a research report stating that it maintains the fair value forecast of HKD 86 for Swire Pacific A (00019), the narrow moat, with no significant changes expected. They believe that the stock valuation is reasonable. Morningstar predicts that Swire will have a compound annual growth rate of 12.6% in operating profit over the next three years, due to the recovery of the real estate business in 2027-2028. Cathay Pacific Airways (00293) will play a role in driving growth in 2025, but their influence is expected to weaken in the future. The increase in aviation fuel costs poses a short-term risk. Softening rental rates in the Hong Kong office market are expected to erode property profits in 2025. However, the bank believes that projects under the HKD 100 billion investment plan will support mid-term profit growth, including the launch of new investment properties in mainland China and the sale of residential units. Swire's core earnings are expected to grow by 5% in 2025, mainly driven by a 19% increase in the aviation business, partially offset by a decline in the real estate business. Dividends are expected to increase by 13% to HKD 3.8 per share. The bank stated that the dividend exceeded expectations, mainly due to capital cycling in the real estate business. Management reaffirmed its progressive dividend policy and continues to strive to maintain a core payout ratio of at least 50%. Therefore, Morningstar has raised its dividend forecast for 2026 to HKD 3.99 per share.