MTR: Increasing Uncertainty Rating to Medium From Low Due to Hong Kong Housing Market Volatility

We are increasing our Morningstar Uncertainty Rating to Medium from Low for narrow-moat MTR. While we continue to see stability in its core business in Hong Kong transport operations, we believe the updated rating better reflects the volatility in MTR’s profit from Hong Kong residential property development. Hong Kong's residential supply remains elevated while demand remains soft, given the uncertain economic outlook and the slower-than-expected pace of interest rate cuts. Consequently, we believe the average selling price for residential projects may continue to face pressure in 2025. Meanwhile, developers’ interest in MTR's project tenders is likely to remain weak, resulting in lower profit-sharing from property development rights.