The US bond yields continue to rise, dragging down Hong Kong stocks, and overall the Hong Kong market has clearly entered an adjustment phase. As market demand for safe-haven assets increases, defensive stocks will receive significant support. Fung Shing Life Services (00331), which I have consistently recommended for long-term holding, recently announced its full-year 2026 results. Shareholders' profit decreased by 7.7% to HK$418.2 million. However, a breakdown of the segments clearly shows that the decline was due to cyclical engineering adjustments, while recurring services continued to develop steadily. The gross margin improved from 12.9% to 13.1%, reflecting that the group maintains a solid development momentum amid structural transformation.
The group's long-standing 'three core segments, seven performance drivers' continue to benefit from steady demand. In fact, the main reason for the slight decline in performance this time was the drag from electromechanical engineering, with revenue falling 12% to HK$2.389 billion. This was due to projects in Tuen Mun residential, Central government buildings, and Hangzhou nearing completion, coupled with delays in projects such as the Gloucester Road District Court and Tin Shui Wai Market, leading to a drop in revenue contribution from this business. However, other segments performed well: property asset management revenue rose 3% to HK$720 million; the core supporting services (accounting for 60% of group revenue) increased by 1.9% to HK$4.826 billion. Additionally, environmental services revenue surged 35%, security and concierge income rose 10%, insurance advisory income increased 12%, and engineering technology revenue grew 6%, sufficient to offset the pressure from reduced government cleaning contracts. Notably, the group is shifting resources from low-margin cleaning services to high-value-added projects such as chiller replacement, commercial building refurbishment, electric vehicle charging, and event security. The value of outstanding contracts in this business rose 26% to HK$8.1 billion, with around HK$3.5 billion in new and renewed contracts for the year, and approximately 68% coming from public-sector clients such as the Housing Authority, Housing Society, Airport Authority, and Urban Renewal Authority.
*Dividend yield around 7%*
Most notably, the group's total outstanding contracts increased by 3% to HK$15 billion, with total contract value reaching HK$23.5 billion, and newly secured contracts amounting to approximately HK$7 billion, providing strong support for revenue over the next 2 to 3 years. Furthermore, the group is making aggressive moves in green business development, securing electromechanical contracts related to the Northern Metropolis worth about HK$2.3 billion during the period, and closely monitoring potential tenders worth around HK$16.1 billion. In the coming decade, housing supply, the Northern Link, Airport City, Macau casino refurbishments, and Greater Bay Area projects will simultaneously drive demand for property management, cleaning, security, and electromechanical services.
The group's financial position is very sound, with cash and bank balances of HK$829 million during the period and a net debt ratio maintained at zero. The proposed final dividend is 17.6 cents per share, bringing the total dividend for the year (including the interim dividend) to 36.5 cents per share, with a payout ratio maintained at 40.1%. The current dividend yield is around 7%, making it still one of my preferred stocks for medium- to long-term holding. {Independent Stock Analyst, Albert Chan}
*The author does not hold the aforementioned stocks
*Articles signed and/or unsigned published in {Economic Times} represent the authors' personal opinions and do not reflect the stance of {Economic Times}. {Economic Times} serves as a platform providing free expression of views.
The group's long-standing 'three core segments, seven performance drivers' continue to benefit from steady demand. In fact, the main reason for the slight decline in performance this time was the drag from electromechanical engineering, with revenue falling 12% to HK$2.389 billion. This was due to projects in Tuen Mun residential, Central government buildings, and Hangzhou nearing completion, coupled with delays in projects such as the Gloucester Road District Court and Tin Shui Wai Market, leading to a drop in revenue contribution from this business. However, other segments performed well: property asset management revenue rose 3% to HK$720 million; the core supporting services (accounting for 60% of group revenue) increased by 1.9% to HK$4.826 billion. Additionally, environmental services revenue surged 35%, security and concierge income rose 10%, insurance advisory income increased 12%, and engineering technology revenue grew 6%, sufficient to offset the pressure from reduced government cleaning contracts. Notably, the group is shifting resources from low-margin cleaning services to high-value-added projects such as chiller replacement, commercial building refurbishment, electric vehicle charging, and event security. The value of outstanding contracts in this business rose 26% to HK$8.1 billion, with around HK$3.5 billion in new and renewed contracts for the year, and approximately 68% coming from public-sector clients such as the Housing Authority, Housing Society, Airport Authority, and Urban Renewal Authority.
*Dividend yield around 7%*
Most notably, the group's total outstanding contracts increased by 3% to HK$15 billion, with total contract value reaching HK$23.5 billion, and newly secured contracts amounting to approximately HK$7 billion, providing strong support for revenue over the next 2 to 3 years. Furthermore, the group is making aggressive moves in green business development, securing electromechanical contracts related to the Northern Metropolis worth about HK$2.3 billion during the period, and closely monitoring potential tenders worth around HK$16.1 billion. In the coming decade, housing supply, the Northern Link, Airport City, Macau casino refurbishments, and Greater Bay Area projects will simultaneously drive demand for property management, cleaning, security, and electromechanical services.
The group's financial position is very sound, with cash and bank balances of HK$829 million during the period and a net debt ratio maintained at zero. The proposed final dividend is 17.6 cents per share, bringing the total dividend for the year (including the interim dividend) to 36.5 cents per share, with a payout ratio maintained at 40.1%. The current dividend yield is around 7%, making it still one of my preferred stocks for medium- to long-term holding. {Independent Stock Analyst, Albert Chan}
*The author does not hold the aforementioned stocks
*Articles signed and/or unsigned published in {Economic Times} represent the authors' personal opinions and do not reflect the stance of {Economic Times}. {Economic Times} serves as a platform providing free expression of views.
