Hong Kong’s MTR Corporation (MTRC) has been exploring ways to cut costs and diversify income streams as it seeks to fulfil an investment commitment amounting to HK$165 billion over the next decade, local media have reported.
Citing an MTRC source, multiple outlets reported on Friday that the railway giant was seeking new income sources beyond its “rail-plus-property” business model, given the struggling property market.
The current model refers to the MTRC using income from developing properties above stations to fund railway projects, as well as its operations and maintenance.
But the property market in Hong Kong has remained weak in recent years and an MTRC development project at the planned Tung Chung East station failed to attract any bidders in November 2023.
The railway operator halved the size of the project to about 600 flats and eventually awarded it to developer Nan Fung Group last month.
Meanwhile, the MTRC has pledged to invest HK$65 billion in renewing and repairing its railway assets between 2023 and 2027, according to the company’s 2024 interim report.
Railway projects currently in the early stages of planning or construction were expected to cost HK$100 billion, according to local media reports.
Such projects include Kwu Tung Station on the East Rail Line, Hung Shui Kiu Station on the Tuen Ma Line, Oyster Bay Station on the Tung Chung Line, and the Tuen Mun South Extension – all planned to be completed by 2034.
The HK$165 billion combined costs are roughly equivalent to the MTRC’s market capitalisation as the stock market closed on Thursday, at HK$26.5 a share.
The MTRC source said new investment plans could cost over HK$200 billion if accounting for the Northern Link and the South Island Line extension, which would be “double the size of the current MTRC market capitalisation,” according to Ming Pao.
The source said options for new sources of revenue included issuing bonds or selling the company’s properties, but sale prices may be rolled back given the weak market sentiment.
The source also pledged the introduction of “new technology” that could reduce the costs of repairing railway assets.
HKFP has reached out to the MTRC for comments.
Government deficit
The weak property market has also threatened the Hong Kong government’s financial health. Finance chief Paul Chan last month predicted the city’s budget deficit to be HK$100 billion in the current financial year, ending on March 31, citing a land sales slump.
It would be the third consecutive year that the city logged a deficit exceeding HK$100 billion.
The Hong Kong government is the largest stakeholder in the MTRC, holding 74.4 per cent of its shares.
