HKT-SS (06823) posted a first-half performance that aligned with forecasts, leading Morgan Stanley to reaffirm its 'Overweight' rating on the stock with a target price of HK$14.

According to Morgan Stanley's report, the company's adjusted free cash flow (AFF) for the first half grew 3% year-on-year, which was in line with the investment bank's projections. Further cost reductions are expected to support cash flow growth next year.

Morgan Stanley noted that HKT-SS is pursuing a capital-light AI model, which suggests limited concerns regarding cash flow and capital expenditure. However, the AI business remains in its early stages, and the adoption curve will be the next key point to monitor.

The current dividend yield is estimated at 6.6%. Based on strong execution, cost savings, and selective AI initiatives, the valuation is considered very attractive.