Citigroup: Initiates coverage of CTF SERVICES (00659) with a "buy" rating and a target price of 10.6 Hong Kong dollars.

Citigroup released a research report stating that it is initiating coverage on CTF SERVICES (00659) for the first time with a "buy" rating and a target price of 10.6 Hong Kong dollars. The firm is optimistic about CTF SERVICES mainly because of: (1) a sustainable and increasing dividend policy (estimated dividend yield of around 7% for the 2026 fiscal year); (2) strong growth in attributable operating profit (AOP) through CHOW TAI FOOK Life's life insurance business (projected +17% for the 2026 fiscal year); and (c) continuous active capital rotation. The firm stated that CTF SERVICES has been paying dividends annually since its listing 23 years ago, and the free cash flow analysis shows that the dividend coverage ratio has been significantly above 1x for the past five years, with expectations that this level will be maintained for the 2026 to 2028 fiscal years. A conservative forecast for the 2026 fiscal year is a dividend of 0.6 Hong Kong dollars per share, implying an attractive dividend yield of around 7%. CHOW TAI FOOK Life is benefiting from strong growth in the Hong Kong life insurance market, coupled with channel reforms and prudent cost control, with expectations for mid to high double-digit growth in AOP for the 2026 to 2028 fiscal years. The management is also actively divesting non-core assets, having received over 300 million Hong Kong dollars in the first half of the 2026 fiscal year, with potential future sales or contributions of around 3 to 4 billion Hong Kong dollars.