Morgan Stanley has issued a research note reaffirming its "Overweight" rating on SEAZEN (01030) after updating the company's risk-reward assessment. The investment bank has set a price target of HK$2.30, derived from a valuation methodology that combines a 40% discount to net asset value (NAV) with net debt considerations, and it continues to regard the stock as a top pick.

The firm highlights that SEAZEN's operations are progressively returning to normal, with the primary bullish arguments centering on the value release from its investment properties and a reduced drag from the residential development segment. Morgan Stanley has trimmed its core earnings forecasts for SEAZEN for the 2026 to 2028 period by 10%, 4%, and 5%, respectively, reflecting higher interest expenses, which are partially offset by better-than-expected savings in selling and administrative costs.

Morgan Stanley believes SEAZEN's current valuation is appealing, trading at approximately 4 times the projected recurring profit for 2027 and 0.2 times its historical price-to-book ratio. The bank projects rental income to achieve a steady compound annual growth rate of 3% to 4%, supported by solid mall operations, further market share gains in lower-tier cities, and the central government's intensified push to bolster consumption over the next five years.

Additionally, the potential spin-off of a public or private real estate investment trust (REIT) within the next one to two years could unlock the value of its shopping mall portfolio, thereby reducing leverage and enhancing book value. As operations normalize, Morgan Stanley suggests that SEAZEN is likely to resume dividend payments this year.