MTR Corp. (0066.HK)

Research evidence excerpt

MTR Corp. (0066.HK)

Goldman Sachs MTR Corp. (0066.HK)

pressure for another year. For its retail rental portfolio, management shared that

the pace of its tenant sales recovery is broadly in line with the broader Hong Kong

retail market (i.e., +11% yoy in 4M26), but rental reversion remained negative in

recent months. They are hopeful that the reversion trend will improve ahead vs.

-8.5% in 2025. Among its malls, Elements in West Kowloon performed better given

its greater exposure to luxury segment benefiting from wealth effect amid HK

housing market recovery.

n Healthy demand for site tenders - Given its commitment to building more rail

projects, under the Rail-plus-property model, the government has awarded MTRC

with more property rights totaling 4.53mn sqm in GFA term. This would likely

support more site tenders by the group, i.e., equivalent 5-7k residential units vs.

2-3k units over the last 5-6 years (Exhibit 3) esp. amid better housing market

sentiment (i.e., the Centaline index +9.7% YTD, transaction volume +45% yoy ytd).

Indeed, it successfully tendered out Kam Sheung Road Station Phase 2 in Apr to a

consortium formed by Sino Land, China Overseas, and China Merchants Land (link),

aiming to provide 1,290 residential units. The group plans to tender Tuen Mun A16

Package II, another sizeable project with a GFA of 0.3mn sqm designed to provide

5,510 residential units, within 2Q26. Subject to market conditions and capex needs

of its new railway projects, it may consider launching more sites for tenders in

coming months.

n Secured sufficient funding to cover capex in medium term, but net gearing ratio

is set to increase - MTRC has so far incurred ~HK$25bn capex out of HK$140bn

budgeted for the development of 6 new railway projects. With HK$50bn cash on