New lines put MTR cash levels under strain
In the next two years, rail operator will have to shoulder expenses of up to HK$52.8b while waiting for fund flows from property projects
MTR's new rail projects are expected to strain the firm's cash position over the next two years, with a dearth of profit from property sales over the past 18 months compounding its predicament.
Four analysts contacted by the South China Morning Post ahead of the company's interim results announcement today said they expected the underlying profit of the city's sole rail operator to fall between 3.5 per cent and 6.4 per cent to less than HK$4 billion in the first half.
Meanwhile, the median estimate of 12 analysts polled by Bloomberg forecast the group's full-year earnings to decline 17.85 per cent year on year.
While profit growth from the local transport business and its related commercial and rental income were expected to remain solid, the group's new lines - likely to boost the network's capacity by 25 per cent - will only begin contributing to MTR from early 2015. In the next two years, the group will have to shoulder expenses of up to HK$52.8 billion as the amount of works peak for its five new rail projects.
"The group may risk heightening its net debt to equity ratio again like in 2007, if it needs to seek project financing or bank loans to bridge the funding gap," said Kenny Tang Sing-hing, general manager of securities and asset management of AMTD Financial planning.
The group worked over the years to bring down its gearing ratio to 10.9 per cent last year from a high of 46.5 per cent before its merger with the Kowloon Canton Railway in 2007.