＜Research＞JPM Maintains PCCW's Neutral Rating, Considers HKT-SS Better Investment Target

　　JPMorgan noted in a report that PCCW (00008.HK) -0.010 (-0.251%) Short selling $1.04M; Ratio 4.396% maintained its interim DPS at HK9.77 cents. At the same time, HKT-SS (06823.HK) +0.050 (+0.527%) Short selling $5.91M; Ratio 4.353% , a subsidiary of PCCW, plans to use the proceeds from the sale of a 40% stake in its passive network business to pay off US$870 million of debt, which will lower HKT's interest expenses and improve its dividend outlook.

　　However, JPM estimated that the incremental dividend income PCCW will receive from HKT as a result of the latter's debt repayment will be insignificant, at just HK$60 million. If PCCW does not dispose of its assets in the future, the broker projected it to maintain a stable full-year dividend and further reduce its future dividend distribution pass-through rate from HKT from 100% in 2022 and 97% in 2023 to 90% in the long term.

　　Related NewsHKT-SS Interim NP $1.99B, Up 1.9%; Interim Div. $32.92 Cents per Shr Stapled Unit

　　In terms of business operations, JPM said while PCCW's free-to-air TV business ViuTV (blue Viu) was strong, its OTT business Viu OTT (yellow Viu) was weak in 1H24, while its telecoms business remained stable. Despite PCCW's 10% dividend yield, the broker maintained a Neutral rating on PCCW, with a target price of HK$4. The broker believed the potential decline in the distribution pass-through rate from HKT would limit the upside of PCCW's dividend in the next few years.

　　At the investment level, JPM considered HKT to be better than PCCW. The broker rated HKT Overweight due to its 8% dividend yield, improved outlook for dividend per share stapled unit, lower debt leverage and potential US interest rate cut.

　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-07-26 16:25.)

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