Tai Mo estimates that the amount associated with the early termination of operations by the MTR Corporation of the Stockholm commuter rail in Sweden is equivalent to 10% of its underlying profit in 2023.
The Zhitong Finance app learned that Daimo published a research report stating that it maintains the “reduced holdings” rating of the MTR Corporation (00066), with a target price of HK$29. The company's early withdrawal from one of Sweden's railway operations is expected to involve an additional cost of 700 million yuan. The bank estimates that the relevant amount is equivalent to 10% of the MTR's basic profit in 2023. It is also believed that its free cash flow is low, recurring profit recovery is slow, profit prospects are low, and valuations are unattractive, and that the above news increases negative factors.
The bank pointed out that the MTR terminated the operation of Sweden's Stockholm Commuter Railway early. The franchise began in 2016 for a period of 10 years, but the company has been facing a continuing shortage of local drivers and maintenance issues, leading to serious operational problems. MTR estimates that it will need to confirm additional expenses of about $700 million in its consolidated profit and loss statement for the year ended 31 December 2023, including about $196 million in “exit fees” due to early termination of the agreement, payment of about $210 million to resolve other unresolved issues relating to the operation and maintenance of the Stockholm Commuter Railway, and provision in its consolidated accounts. The amount is equivalent to 10% of the underlying profit forecast for 2023.
