Citi has issued a research report initiating coverage on CTF SERVICES (00659) with a "Buy" rating and a target price of HK$10.6. The bank expressed optimism about CTF SERVICES, citing three main factors: (1) a sustainable and progressive dividend policy, with a projected dividend yield of approximately 7% for fiscal year 2026; (2) strong growth in attributable operating profit from the life insurance business through Chow Tai Fook Life, forecast to increase by 17% in fiscal 2026; and (3) ongoing active capital recycling.
The report noted that CTF SERVICES has consistently paid dividends annually since its listing 23 years ago. Free cash flow analysis indicates that dividend coverage has been significantly above 1x over the past five years, and this level is expected to be maintained from fiscal 2026 to 2028. The bank conservatively forecasts a dividend per share of HK$0.6 for fiscal 2026, implying an attractive dividend yield of around 7%. Chow Tai Fook Life is benefiting from robust growth in Hong Kong's life insurance market, and coupled with channel reforms and prudent cost control, attributable operating profit is projected to achieve mid-to-high double-digit growth from fiscal 2026 to 2028. Management is also actively divesting non-core assets, having already received over HK$300 million in the first half of fiscal 2026, with potential future sales possibly generating an additional HK$3 to 4 billion.
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