JPMorgan has issued a research report maintaining its "Overweight" rating on CK Asset Holdings Ltd (HKEX: 01113) with a target price of HK$52, citing the group's net cash position, limited impact from a rising interest rate scenario, and more potential capital recycling opportunities.

CK Asset Holdings Ltd (HKEX: 01113) announced on the evening of October 8 that it had decided to demolish and rebuild three of the six residential towers at the Anderson Road "Starter Homes for Hong Kong Residents" project, after discovering serious deviations in steel reinforcement from the approved plans.

The bank roughly estimates the additional construction cost at HK$1.2 billion to HK$1.4 billion, equivalent to 0.8% to 0.9% of market capitalization, and expects it could reduce the project's development profit margin from 19% to 8%-10%, dragging down full-year earnings by approximately 8%.

JPMorgan noted that this incident is not new information, as it was first discovered back in 2024, but CK Asset Holdings Ltd (HKEX: 01113) only formally announced follow-up actions now.

The above estimates do not account for potential recoveries from insurance claims and litigation, as the incident involves a potential bribery case at the contractor level rather than at CK Asset Holdings Ltd (HKEX: 01113) itself.

The bank expects a mild negative reaction in the company's share price.

In addition, the Buildings Department has approved the relevant demolition plans, though demolition work has not yet commenced, and confirmed there is no immediate danger to the overall building structure.

For the other three towers that do not require rebuilding, the bank assumes additional remedial works costing approximately HK$500 per square foot of saleable area will still be needed.