Fri Jan 24, 2020 18:38
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Principal Activities

The Group is principally engaged in the following core businesses - railway design, construction, operation, maintenance and investment in Hong Kong, Macau, the Mainland of China and a number of overseas cities; project management in relation to railway and property development businesses in Hong Kong and the Mainland of China; station commercial business including leasing of station retail space, leasing of advertising space inside trains and stations and enabling of telecommunication services on the railway system in Hong Kong; property business including property development and investment, management and leasing management of investment properties (including shopping malls and offices) in Hong Kong and the Mainland of China; investment in Octopus Holdings Limited; and provision of railway management, engineering and technology training.

Latest Results

The Group's profit attributable to shareholders for the 6 months ended 30-06-2019 amounted to HKD 5.51 billion, a decrease of 22.3% compared with previous corresponding period. Basic earnings per share was HKD 0.8974. An interim dividend of HKD 0.25 per share was declared. Turnover amounted to HKD 28.27 billion, an increase of 7.2% over the same period last year. (Announcement Date: 08 Aug 2019)

Business Review - For the six months ended June 30, 2019

As we entered 2019, the 40th anniversary of MTR service, we continued to deliver on our three-pronged strategy of strengthening and growing our Hong Kong business, maintaining growth in our Mainland of China and international businesses, and enhancing our corporate reputation. In Hong Kong, our business performed reasonably well despite a weaker local economy and caution in world markets. In the Mainland of China and in our international operations, we also made satisfactory progress.

Among our other achievements, we opened two new lines: Sydney Metro Northwest in Australia and the initial section of Hangzhou Metro Line 5 in the Mainland of China. Even for a rapidly expanding railway company such as ours, this is a noteworthy achievement.

On the other hand, we have had to deal with the incidents relating to the Shatin to Central Link, namely allegations concerning workmanship in relation to the Hung Hom Station extension, and an insufficiency of construction records and certain constructions issues at the Hung Hom North Approach Tunnel, the South Approach Tunnel and the Hung Hom Stabling Sidings.

On 18 July 2019, the Company completed and submitted to Government two separate final reports in respect of incidents relating to the Hung Hom Station extension, the Hung Hom North Approach Tunnel and South Approach Tunnel and the Hung Hom Stabling Sidings. These reports contain, inter alia, proposals for suitable measures required at certain locations to achieve code compliance.

To enable the public to enjoy as much of the new service as practicable and at the earliest opportunity, Government accepted the Company’s recommendation that the Tuen Ma Line should open in phases, with the first phase involving the opening of commercial service on the Tuen Ma Line from Tai Wai Station to Kai Tak Station targeted to occur in the first quarter of 2020.

In order to progress the Shatin to Central Link project and to facilitate the opening of commercial service on the Tuen Ma Line from Tai Wai Station to Kai Tak Station in the first quarter of 2020, the Company will fund, on an interim and without prejudice basis, certain costs arising from the Hung Hom incidents and associated with the phased opening of the Tuen Ma Line, whilst reserving its position as to the ultimate liability for such costs. Currently, the Company’s best estimate of such costs is around HK$2 billion in aggregate. In light of this, the Company has made a provision of HK$2 billion in its consolidated profit and loss account for the six months ended 30 June 2019. This amount does not take into account any potential recovery from any other party. Furthermore, there is no certainty that, ultimately, the entirety of this amount will need to be funded by the Company.

The Company and Government will continue discussions with a view to reaching an overall settlement in relation to the Hung Hom incidents and their respective funding obligations relating to the cost to complete the Shatin to Central Link project and certain costs arising from the Hung Hom incidents and certain costs associated with the phased opening of the Tuen Ma Line.

On 18 March 2019, a train collision occurred near Central Station on the Tsuen Wan Line during a drill in non-traffic hours for the new signalling system. All train tests relating to the new signalling systems were immediately suspended following this incident. An Investigation Panel was then set up to identify the root causes of the incident and make recommendations on how to prevent a reoccurrence. The panel submitted its report to the Electrical and Mechanical Services Department on 17 June 2019 and made it public on 5 July 2019.

On a more positive note, our Guangzhou-Shenzhen-Hong Kong High Speed Rail (Hong Kong Section) service (“HSR”) has been gaining widespread acceptance among the travelling public since its launch on 23 September 2018. This was reflected in the over 100,000 passengers who took the HSR on 7 February 2019 during the Chinese New Year holiday and the total patronage of 9.9 million in the first half of 2019.

On our heavy rail network in Hong Kong, we maintained our world-class service performance in terms of train service delivery and passenger journeys on-time at a world-class level of better than 99.9%. This was the best first half performance of passenger journeys on-time since the Rail Merger. We also continued to invest heavily in rail infrastructure and enhance the customer experience through a variety of digital initiatives under Rail Gen 2.0.

In our property business, we awarded LOHAS Park Package 11 in Tseung Kwan O. Together with most of the other packages at LOHAS Park that have already been awarded, LOHAS Park is rapidly maturing into a vibrant new community in Hong Kong.

With regard to our financial performance, total revenue for the first six months of 2019 increased by 7.2% to HK$28,272 million when compared with the comparable period of 2018. This was mainly attributable to the incremental contribution from HSR, which opened in September last year. Operating profit before Hong Kong and Mainland of China property development businesses, depreciation, amortisation and variable annual payment decreased by 9.8% to HK$8,411 million, predominantly due to the provision of HK$2 billion relating to the Shatin to Central Link project. Excluding the Company’s Mainland of China and international railway, property rental and management subsidiaries, revenue grew by 11.3%, while operating profit decreased by 13.2%. Recurrent profit attributable to equity shareholders, being net profit before property development profits (from both Hong Kong and the Mainland of China) and investment property revaluation, decreased by 40.6% to HK$2,665 million. Post-tax profit from property developments was HK$775 million. Excluding investment property revaluation, net profit from underlying businesses attributable to equity shareholders decreased by 26.0% to HK$3,440 million. Excluding the HK$2 billion provision relating to the Shatin to Central Link project and HK$436 million provision relating to the South Western Railway franchise, net profit from recurrent and underlying businesses would have increased by 13.8% and 26.4% respectively. The gain in revaluation of investment properties was HK$2,066 million, as compared with HK$2,435 million in the first six months of 2018. As a result, net profit attributable to equity shareholders was HK$5,506 million, equivalent to earnings per share of HK$0.90 after revaluation. The Board has declared an interim dividend of HK$0.25 per share.

Business Outlook - For the six months ended June 30, 2019

During the remainder of 2019, even though our commercial operations in Hong Kong have some defensiveness against slower economic growth, we will need to contend with a variety of risks, including uncertainties surrounding the worldwide and local economy, particularly trade conflicts, the possibility of an economic recession and political risks. Since June 2019, sluggish retail sales and conservative market sentiment have been on the rise, due to China-US trade tensions and the ongoing public order events in Hong Kong. As a result, the advertising market and our rentals which are subject to renewals will be dependent on the development of such situations during the second half of the year.

For our new railway projects in Hong Kong, we will work with Government to agree on the details of the phased opening of the Shatin to Central Link, covering the three new stations at Hin Keng, Diamond Hill and Kai Tak, targeting the first quarter of 2020. We will also work with Government on the arrangements for the completion of the rest of the Shatin Central Link and progress discussions with Government on the project proposals submitted under RDS 2014.

In addition, subject to market conditions, we will be inviting tenders for Wong Chuk Hang Station Package 4 and LOHAS Park Package 12 over the next six months or so, providing a total of around 2,650 residential units. In our property development business, the booking of development profits this year for MALIBU (LOHAS Park Package 5) and the shopping centre of LOHAS Park Package 7 is now dependent on construction progress.

Outside of Hong Kong, our businesses should see performance in line with expectations. However, we are still working to overcome the challenges faced by Stockholms pendeltag in Sweden, as well as the South Western Railway franchise in the UK. Full line service on Hangzhou Metro Line 5 is targeted to commence by the end of the year, and we are working on the financial close of Sydney Metro City and Southwest. The Macau SAR Government has also announced the opening of Macau LRT Taipa Line by the end of 2019.

Source: MTR Corporation (00066) Interim Results Announcement

Business Nature

The Group¡¦s rail business should benefit from the expected economic growth. However, this growth may slow in 2007 as a result of continued intense competition and no fare increases for 24 months from April 200 as part of the merger MOU. Its station commercial and other businesses will also benefit from the positive economic condition as well as the full year impact of Ngong Ping 360. In its property businesses, the property investment and management businesses will benefit from the opening of Ginza Mall in Beijing, the expected opening of the Elements shopping centre in Kowloon Station towards the end of 2007, and the full year impact of The Edge. However, it should be noted that new shopping centres generally achieve lower margins than established centres in their initial years of operations. Renovation work will be undertaken at the Luk Yeung Galleria in 2007.


On future Hong Kong projects, the Group made significant progress on the construction of Disneyland Resort Line (DRL), formerly known as the Penny¡¦s Bay Rail Link,which will connect Hong Kong Disneyland with the Tung Chung Line, and are confident of meeting the target completion date of 1 July 2005. The Tung Chung Cable Car project, the major new tourist attraction project for Hong Kong, is also on track for completion by early 2006, following the start of construction work in February 2004. The Group¡¦s property rental and management business will benefit from Two IFC being fully leased. In the property development business the Group expects that over the next two years, the bulk of such profit will come from the remaining Airport Railway developments as they are completed. Beyond that, the Group expects Tseung Kwan O property developments to be a significant contributor. In Airport Railway developments the Group expects to receive share of the remaining 25,245 gross square metres of retail shell structure at Union Square mainly over the next two years, and the fit out works will take three years prior to an anticipated opening date of end 2007.

Rex Auyeung Pak-kuen
Contact Info
Company Address:
MTR Tower, Telford Plaza Kowloon Bay, Kowloon, HK
HSI: 27,949.64 98.25
0.05 (0.1%)
As of16:15 24 Jan 2020
Open: 45.90 52Wk High: 55.75
Day High: 46.20 52Wk Low: 42.45
Day Low: 45.80 P/E: 17.461
Prev. Close: 46.20 Yield: 2.60%
Volume: 1.45M
Mkt Cap: 284.50B
Turnover: 66.77M NAV: 29.391
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Company Address:
MTR Tower, Telford Plaza Kowloon Bay, Kowloon, HK

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