Hang Seng blue-chip MTR still divides analysts after US$9.2 billion sell-off since July

Falling ticket and retail revenues, high repair costs and shrinking tourist spending are punishing MTR’s short-term performance as company stock and bond fall

Hong Kong’s sole rail operator is still a good long-term bet as future property sales could offset losses from protests, says Kenny Tang of China Hong Kong Capital Asset

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MTR CEO Jacob Kam faces an uphill task in restoring the rail operator’s financial health. Photo: Winson Wong

Published: 8:15am, 21 Oct 2019Updated: 9:26am, 21 Oct 2019

MTR Corporation is facing its toughest challenge since Occupy Central five years ago as the current social unrest turns it into one of the biggest losers on Hong Kong’s stock market.

Shares of the city’s sole rail operator have crashed 21 per cent as of October 18 from the year’s high on July 18, as protests against a now-withdrawn extradition bill turned violent. The Hang Seng Index has fallen 6.1 per cent in the same period. The fallout has erased HK$72 billion (US$9.2 billion) of MTR’s market value. Among the benchmark index members, only Swire Pacific has fared worst in that period.

The slump underscores the tasks faced by chief executive officer Jacob Kam Chak-pui in restoring its operations and comforting investors about its earnings and credit outlook, after protesters vented their frustrations against the authorities by thrashing MTR assets across its network. The government controls 75 per cent of MTR.

“It has become public enemy number two, after the police,” said Francis Lun, chief executive officer at Geo Securities in Hong Kong, who has maintained his ‘sell’ calls since July. “The demonstrators have so much hatred for MTR that they will try to destroy equipment whenever they have a chance.”

Anti-government protesters start a fire at an entrance of Wan Chai MTR station on September 15. Photo: Sam Tsang

The strife marks the deepest political crisis for the local government since the British handover in 1997, while a key election looms next month. It also comes as the city’s economy is on track to enter a technical recession in the three months ending December.