JPMorgan: Maintains CK ASSET (01113) "Overweight" rating, target price HK$52, expects additional redevelopment costs for Anderson Road project to reach HK$1.2 billion to HK$1.4 billion

JPMorgan released a research report maintaining its "Overweight" rating on CK ASSET (01113) with a target price of HK$52, citing the group's net cash position, limited impact from a rate hike scenario, and more potential capital recycling opportunities. CK ASSET announced on the evening of October 8 that it had decided to demolish and rebuild three of the six residential towers at the Anderson Road "Starter Homes Project" after discovering serious deviations in steel reinforcement from the approved plans. The bank roughly estimates the additional construction cost at HK$1.2 billion to HK$1.4 billion, equivalent to 0.8% to 0.9% of market capitalization, and could reduce the project's development profit margin from 19% to 8% to 10%, dragging down full-year earnings by about 8%. JPMorgan noted that this incident is not new information, as it was first discovered back in 2024, but CK ASSET only formally announced follow-up actions now. The above estimates do not factor in potential recoveries from insurance claims and litigation, as the incident involves a potential bribery case at the contractor level rather than CK ASSET itself. The bank expects a slight negative reaction in the company's share price. In addition, the Buildings Department has approved the relevant demolition plans, but demolition work has not yet commenced, and it confirmed that the overall building structure poses no immediate danger. For the other three towers that do not require rebuilding, the bank assumes additional remedial works costing approximately HK$500 per square foot of saleable area will still be needed.