Morgan Stanley released a Research Report stating that it has raised the Target Price for HKT Trust and HKT (06823) from HKD 10.3 to HKD 11.5, maintaining a 'Shareholding' rating and listing the stock as a sector top pick. The Target Price corresponds to a forecast dividend yield of 7.1 cents, with a 350 basis points spread over the USA ten-year Bonds target yield of 3.6 cents. This spread has narrowed by 50 basis points from the original assumption, reflecting the market's recognition of high visibility dividend payments amidst tariff and policy uncertainties.
The bank also raised the Target Price for PCCW (00008) from HKD 3.9 to HKD 4.5, based on the valuation adjustment of HKT, maintaining an investment rating of 'in line with the market', as the current valuation has fully reflected the risks of dividend transmission rate. The bank expects HKT to achieve a dividend per share growth of about 4% this year, with acceleration compared to 2024, benefiting from a more stable environment for fixed-line business and the solid position of mobile business along with ongoing cross-selling opportunities. The interbank offered rate among local Banks has fallen to 3.5 cents, easing interest burdens, allowing HKT to gain more profits from cost savings and efficiency improvements.
