Damo: Xincheng Development (01030) operations have returned to normal and dividends are expected to resume this year

The Zhitong Finance App learned that Morgan Stanley released a research report stating that after updating the risk-return analysis of Xincheng Development (01030), it maintained its “gain” rating, based on a comprehensive valuation method with a 40% net asset value (NAV) discount and net liabilities, the target price was HK$2.3, and continued to regard it as the preferred stock. The bank pointed out that Xincheng development and operation are returning to normal, and the release of investment property value and the reduction in the drag on the residential development business are the main arguments that are optimistic about the stock.

Morgan Stanley lowered Metro Development's 2026-2028 core profit forecasts by 10%, 4%, and 5% respectively to reflect rising interest expenses, which were partially offset by better-than-expected savings in sales and administrative expenses.

The bank believes that Xincheng Development's current valuation is attractive, which is equivalent to about 4 times the predicted recurring profit in 2027 and 0.2 times the historical market account ratio. The bank expects rental income to record a steady compound annual increase of 3% to 4% with steady support from shopping mall operations, and benefit from further market share expansion in low-tier cities and increased support for consumption by the central government over the next five years. Furthermore, the potential spin-off of public and private real estate investment trusts in the next one to two years is expected to unlock the value of its shopping mall portfolio, further reduce debt and increase book value. As operations return to normal, the bank believes Xincheng Development is expected to resume dividends this year.