CLSA: MTR CORPORATION (00066) High-Speed Rail and Shatin to Central Link Disputes Finally Resolved; Maintain "Hold" Rating and Target Price of HK$33

CLSA issued a research report stating that MTR CORPORATION (00066) has reached a settlement with the Hong Kong SAR Government over construction issues related to the High-Speed Rail and the Shatin to Central Link, requiring an overall payment of only HK$2.25 billion to the government, equivalent to approximately 1% of the bank's 2026 forecast net asset value and current market capitalization, and below the HK$6.69 billion liability cap stated in 2015. The bank maintains its "Hold" rating and target price of HK$33. The payment will be recognized as a one-off expense in the profit and loss account in the second half of 2026, equivalent to 11% of the bank's forecast net profit of HK$20.1 billion. Regarding the Shatin to Central Link, both parties will not pay any settlement or other financial compensation to each other; MTR has recognized a HK$2 billion provision for the Hung Hom incident, and the remaining HK$600 million provision will be reversed to the profit and loss account at an appropriate time. The bank maintains its view that MTR will bear all capital expenditure for new railway-related projects in the future, its balance sheet may come under pressure, and it does not rule out future dividend cuts and/or equity issuance.