Hangzhou rail plan drives MTR shares to 4-year high
MTR Corp shares reached a four-year high yesterday after the company expressed interest in a 100 billion yuan Hangzhou subway project in its latest drive into the mainland.
The partially privatised corporation's stock jumped a further 2.83 per cent to $14.50, bringing an accumulated gain of 12.4 per cent over the past month. It has outperformed the Hang Seng Index by 18.38 per cent since the start of the year.
Brokers and analysts attributed the revived interest to the MTR's increasing penetration across the border.
Other key factors, such as an earlier than expected share of profits from property development in West Kowloon and a reversal of fortunes for its subway operations in Hong Kong as the economy improved, spurred buying sentiment.
'The growth story supercedes the protracted overhang of the potential merger with the KCRC and sale of the government's second batch of MTR shares. After all, many investors are forgetful,' one analyst said.
In its latest bid to seek growth outside the matured and competitive Hong Kong market, the MTR yesterday said it was examining a potential role in a planned, eight-line, 280km subway system in Hangzhou.
Ruling out direct investment in the project, a spokeswoman said the MTR would study whether it should play a role as a project manager or consultant. It helped review the feasibility study of Hangzhou's Metro Line One project in 2003.
'We don't think we will invest in the project, but will look at other roles,' she said. 'We will focus our resources on two direct investment projects in Beijing and Shenzhen.'
The Hangzhou project would be developed in phases after securing government approval recently, the Wen Wei Po newspaper reported.
'[The MTR's] current share-price rally appears justifiable seeing how the market is building up some expectations on future net asset value expansion from both property price appreciation [and] overseas value-enhancing subway projects,' said Credit Suisse First Boston in a research note.
The brokerage is the latest to upgrade its earnings and net asset value forecasts for the MTR. It has raised its earnings estimates for the three years to 2007 less than 1 per cent and its net asset value figure 3 per cent to $16.80 per share.
After the MTR disclosed in April that it was likely to recognise profits from internal sales of the Arch apartments in West Kowloon this year instead of next, Daiwa Institute of Research lifted its earnings estimate 44.4 per cent to $5.81 billion this year and 0.7 per cent to $6 billion next year.
