Hong Kong’s MTR Corporation is urgently “reinventing” its business model to fulfil a HK$165 billion (US$21.2 billion) financial commitment to improve and expand rail services amid a struggling property market, the Post has learned.
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A source said on Thursday that the company was revising its proven “rail-plus-property” business model by finding new sources of revenue, while cutting costs, to boost its financial health and prepare for development works in the coming years.
The company pledged in June 2023 to set aside HK$65 billion between that year and 2027 to upgrade ageing rail assets, on top of HK$100 billion earlier promised to extend lines, create new stations and develop properties over a 10-year period.
The total of HK$165 billion is equivalent to its market capitalisation when the stock market closed on Thursday at HK$26.55 a share.
The source said the company could generate cash by selling minority stakes in its shopping malls or commercial properties, in addition to cutting costs by automating trains and repair works, among other technology-based strategies.
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“The business model needs to be reinvented, i.e., to find new sources of income and ways of lowering costs,” the source said. “The financial commitment in the coming decade is massive.”
The MTR Corp was founded 45 years ago and at one point was considered the most profitable rail company in the world, charging relatively affordable fares for reliable services thanks to its business model.