MTRC takes $1.6b hit as unrest derails revenues

Business | Tereza Cai 6 Dec 2019

MTR Corporation (0066) estimated that anti-government protests will cause a negative impact of HK$1.6 billion on the net profit of its Hong Kong recurrent business but it plans to maintain the present progressive ordinary dividend policy as it deemed its overall financial position remains sound.

The subway operator said its Hong Kong transport operations, station commercial businesses, and local property rental businesses were all adversely affected.

The operator explained that social unrest had led to a reduction in patronage of its services, with October and November both seeing the steepest decline of 27 percent each from a year ago.

The total patronage of the company fell 14.2 percent year-on-year to 744.3 million passengers during the period of July to November.

Instances of damage due to the vandalism of MTR stations and facilities have strapped the company with repair and maintenance costs.

Moreover, almost half a year of protests have resulted in a need for enhancement of staffing and security as well as retail concessions and abatements, which increased company costs and further hurt profitability. On the other hand, the MTRC expected to record profits arising from its property development projects at Malibu, or Lohas Park Package 5, and the shopping center of Lohas Park Package 7.

Underlying business profit for the financial year ending on December 31, 2019 is expected to be less compared to the previous year.

However, if the provision of HK$2.43 billion for the Hung Hom incidents related costs and first MTR South Western Trains is excluded, the group expects its underlying business profit in 2019 will be higher than the previous year.

Ken Lo Chi-ming, an independent stock commentator, said he agreed with the company's decision to keep the progressive ordinary dividend policy, unless profits continued to fall dramatically.

He believes that to some extent, the market has priced those negative impacts on the MTRC's current share price and that a share price rebound will only occur as the territory recovers.

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