Citigroup: Maintains "Buy" Rating on CTF SERVICES (00659), Target Price Reduced to HKD 10.3

Citigroup released a research report indicating that CTF SERVICES (00659) is expected to announce its fiscal year 2026 results ending in June at the end of September. The bank expects the company's annual attributable operating profit (AOP) to be approximately flat year-on-year (increasing by 1%), with a regular dividend per share of HKD 0.60 and a total ordinary dividend amount increasing by 4% year-on-year. The target price has been lowered from HKD 10.9 to HKD 10.3, maintaining a "Buy" rating for CTF SERVICES (00659). The bank pointed out that since mid-May, the stock price performance has been relatively weak, possibly due to market concerns over tighter regulations on outbound investment in mainland China affecting Hong Kong's insurance business. However, based on the performance reports of AIA (01299) and PRU (02378) for the first half of this year, the bank believes that the short-term impact of State Council Order No. 837 on mainland visitor business is manageable. In terms of segments, the bank expects the AOP from the road business to remain approximately flat; the financial services AOP is expected to increase by 17%, driven by a 16% year-on-year increase from CHOW TAI FOOK Life and contributions from uSmart in its first year; while the AOP for logistics and construction is expected to decline by 11% and 12%, respectively. The total AOP for the last fiscal year is anticipated to be about HKD 4.499 billion, roughly flat year-on-year. The bank has made slight adjustments to its total AOP forecasts for fiscal years 2026 to 2028, reducing the financial services AOP for fiscal years 2027 to 2028 by 5% to 7%, partially offset by contributions from other segments and updated foreign exchange expectations; it also lowered its earnings forecasts for fiscal years 2026 to 2028 by 3% to 5%.