Lyon: Hong Kong stock conglomerates are still seen as high-quality yield havens and maintain the preferred stock positions of Changhe (00001) and Chow Tai Fook (00659)
The Zhitong Finance App learned that Lyon released a research report saying that Hong Kong stock conglomerates are still regarded by stock investors as high-quality harvest havens, with resilient asset portfolios and rising dividends; the bank maintains unchanged profit forecasts, ratings and target prices, and the sector currently has 37% discounts over net asset value (30% long-term average), and Changhe (00001) and Chow Tai Fook (00659) are still the bank's first choice.
The bank notes that investor interest is still focused on family businesses and is concerned about the next round of catalysts and their schedule. Investors generally agree that Hong Kong stock conglomerates are good profit havens and are not heavily owned by investors; in the face of high uncertainty, investors like the bank's resilient asset portfolio covering various integrated enterprises. According to the bank's current published forecast, Hong Kong stock conglomerates forecast that in 2026, the total recurring profit and cash dividends should increase by 6% and 9% year-on-year, to US$8 billion and US$4.2 billion, respectively. Changhe and Taikoo A (00019) are the two main drivers.
The bank said that the integrated enterprises most discussed with investors were Changhe, Yihe, and First Taiping (00142). Under high oil prices, Cenovus Energy will support long-term profit growth, while the property and non-property business will support Taikoo's projected recurring profit growth in 2026 and 2027; for Jardine and First Pacific, although investors are not very enthusiastic about Indonesia, they agree that both have high-quality assets and attractive stock valuations. As for Changhe, investors have few objections to the bank's arguments, but they are concerned about the schedule of several potential transactions, including the port sale (first announced in March 2025); in the absence of a catalyst, the bank favors shares with steady increases in dividends. For MTR Corporation (00066), the bank continues to see the risk of reduced dividends or equity financing due to high future capital expenditure (2026-2028 guidance of HK$84.8 billion).
In terms of ratings, with the exception of MTR Corporation (00066), which is “owned”, the rest are positive ratings. Changhe Rating is “Highly Confident to Outperform the Market” with a target price of HK$110; Chow Tai Fook created a rating of “Outperform the Market” with a target price of HK$11.5, providing a sustainable dividend rate of 7.6% per year at current prices; Swire Shares and Savage Ratings each “outperform the market” with target prices of HK$114 and HK$6.8, respectively; and MTR's target price is HK$33.