Morgan Stanley has released a research report adjusting its outlook for Wharf Holdings (00004). The firm lowered its bull-case target price for the company from HK$33 to HK$32 and reduced its bear-case target price from HK$15 to HK$14. Based on updated forecasts for net asset value and net debt, the valuation was calculated using a 60% discount to net asset value, which is 0.5 standard deviations below the historical average. The base target price remains unchanged at HK$23. Due to challenging operating prospects and unattractive valuation, with a yield of 1.7%, Morgan Stanley maintains an "Underweight" rating on the stock.

The report incorporates Wharf Holdings' fiscal 2025 results and introduces forecasts for 2028. After accounting for several factors, the bank has raised its basic profit estimates for the company for fiscal 2026 and 2027 by 10% each. These adjustments reflect: (1) updated assumptions regarding retail and office rental adjustments, occupancy rates, and interest rates; (2) revised schedules for property development revenue recognition and project completion; and (3) an improved debt ratio. Given Wharf Holdings' net cash position and stable income streams from rental and logistics properties, Morgan Stanley forecasts that the company's dividend per share will grow by 3% annually from fiscal 2026 to 2028.