BofA Merrill Lynch Taikoo Alpha (00019.HK) has a dividend payout ratio of 70-80% over the next two years, but the ratio is downgraded from "neutral" to "outperform the market", and the target price is lowered from 92 yuan to 86 yuan, a 38% discount to net asset value per share.

According to Merrill Lynch, Swire's medium-term core net profit fell 43 per cent year-on-year to 2.9 billion yuan, 22 per cent lower than the bank's expectations, while interim interest fell 11 per cent to 1 yuan, the first cut since 2008. The bank cut its core earnings forecast for the 2016-2018 fiscal year by 14-21 per cent and its dividend per share by 8 per cent to Rmb3.60. The bank pointed out that the marine services division recorded a loss before interest and tax in the first half of the year, which was lower than expected. Profits attributable to the beverage sector fell 26 per cent year-on-year, with sales in mainland China falling 9 per cent (the bank had expected a drop of 4 per cent). In addition, Cathay Pacific, which has a 45% stake, earns 80% less in half a year. The bank believes that the outlook for the company's marine services and aviation division remains challenging.

The bank also pointed out that the basic profit of its Swire Properties (01972.HK) in half a year was 3.5 billion yuan (down 10 per cent year-on-year), 11 per cent higher than expected. During this period, the office market in Hong Kong was stable and the retail market slowed down. Swire Properties was given a "buy" rating because he had a stable foundation and had been outperforming the parent enterprise.