UBS: Swire Properties (00019) accelerates CATHAY PAC AIR (00293) convertible bond trading, maintains a "Neutral" rating.
UBS pointed out that after the transaction is completed, Swire's stake in Cathay Pacific will drop to 39.2%.
UBS released a research report stating that Swire Properties A (00019) has announced the repurchase of 4.7 billion HKD of CATHAY PACIFIC AIR (00293) convertible bonds and the placement of 362 million shares of CATHAY PACIFIC AIR. After the transaction is completed, Swire's stake in CATHAY PACIFIC AIR will decrease to 39.2%. The bank maintains a "Neutral" rating on Swire Properties A, with a target price of 95 HKD.
UBS believes that this transaction is primarily aimed at reducing its equity stake in CATHAY PACIFIC AIR to mitigate potential fair value losses that could arise from the convertible bonds if the stock price of CATHAY PACIFIC AIR continues to rise. Given that Swire's dividend policy is to distribute 100% of the dividends received from CATHAY PACIFIC AIR, the bank estimates that the annual dividend contribution loss for the fiscal year 2026 will be approximately 340 million HKD, equivalent to 5.6% of Swire's projected dividends.
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