Citibank: CTF SERVICES (00659) sells equity in Changsha Liuyang Expressway to help increase value, target price raised to 10.9 Hong Kong dollars.

Citigroup released a research report stating that CTF Services (00659) announced the sale of 100% equity of the operating target company of the Changsha-Liuyang Expressway (Changliu Expressway) to two Shanghai state-owned assets supervision and administration commission related companies for approximately 1.61 billion RMB. Approximately 109 million RMB will be reserved for potential costs incurred during the sale process. Citigroup raised the target price of CTF Services from HK$10.6 to HK$10.9 and maintained a "buy" rating. The company expects to record a net loss of approximately 80 million RMB in the 2026 fiscal year due to this sale. After the transaction is completed, the target company's bank loans of approximately 2.11 billion RMB will continue to be borne by itself. The bank expects the transaction to be completed as early as the first half of the 2027 fiscal year (i.e. the second half of 2026). Citigroup believes that the comprehensive value after the transaction cost and debt removal is about 105% higher than the bank's calculation of the total asset value of the target company. The bank points out that this asset sale reflects the management's active capital recycling mindset, which helps further reduce the current asset net asset value (NAV) discount of the company (currently about 36%). Although the profit forecast for the 2026 fiscal year is expected to be lowered by 3% due to the loss from the sale, Citigroup believes that the cost savings from the sale can offset most of the operating profit loss from 2027 onward.